For business owners

M&A Transaction Advisory

Attracting an outside investor who would inject equity into a business or undertaking business succession and selling a company create unique circumstances to a business owner due to subject complexity and lengthiness of planning and execution. For most business owners involved in such a process, this would be their first encounter with an M&A deal. This complex process is often associated with high stress, high expectations and time pressure.

We offer business owners opportunity to overcome transaction difficulties thanks to our holistic and comprehensive approach to M&A transactions. We have extensive experience and a wide team of proven and loyal associates (transaction and investment experts, lawyers, tax advisors, financiers, valuation and succession experts) who are able to create added value to a seller and its business. We share knowledge and contacts, and at the same time we are always discreet and professional.

We raise growth capital

Business expansion? We support business owners who seek to raise equity capital necessary for growing their business by bringing in outside investors (investment funds, private equities or industry players), who have sufficient resources that can be invested into our client’s business. Business owner’s appetite for growth and expansion may take many different forms (geographical enlargement, competition takeover, organic investment, entering a new sales channel etc.), nevertheless whatever the form, expansion can be funded from either of: excess free cash reserves, debt (for which there must be sufficient room on a balance sheet) or from equity injection by current shareholders or an outside investor. Our job is to make sure our client’s business makes for an attractive investment opportunity to outside investors.

Succession though exit from the business

Each business is dependent on its organizational, human, technological and financial resources, which have decisive influence on its present success but also on its future potential for growth. Family businesses are successful also because of its inseparable connection to founders – entrepreneurs, who established a company, invested equity capital in its initial development and who grew the business with inherent risks and rewards. It is often due to founder’s personal commitment, knowledge and motivation that a family business has been successful. However, sooner or later each founder will face challenges unseen earlier: Who should take over the business given the age of a founder (family trust, children or management, new owner)? And how shall the business operate without founder’s personal commitment? What personal strategy shall a founder choose, considering wider family needs and company stakeholders interests?

Most common forms of business succession:

  1. The most desirable form of succession is the transfer of the company (ownership of assets and management) to children, provided that they are willing and able to take over responsibility for the family business,
  2. Another option is to employ a professional management team while maintaining family ownership – management team members may be selected from existing key employees or hired from the outside,
  3. The third option is to partially or entirely exit the business by selling the company to a financial or industry investor, allowing for a management buyout or going public through initial public offering (IPO) of shares together with hiring professional management team.

Options (1) and (2) are supposedly the most attractive because they assume that business ownership stays with a family. Nevertheless, these are also the most difficult options to implement, because their success depends on the competencies, abilities and motivation of the successors, and these may not meet the expectations or even contradict the vision of a founder. They also require years of planning and preparation before they take the effect.

We work with business owners, who consider business exit as the only rational succession path.

How do we work with clients?

Strategy & Plan for the M&A transaction

At first our team formulates an overall strategy for business owner’s exit and then gets into details by developing a detailed step and time plan for the transaction (which usually takes between 6 – 12 months), which outlines individual actions to be undertaken, such as: company valuation, transaction marketing, list of potential buyers, confidentiality agreements, process letters, due diligence investigation (financial, tax and legal etc.) as well as the optimal structure and form of the M&A transaction. We manage the course of the entire transaction; in addition to technical matters, we handle investor communication and make sure a business owner and a buyer develop good, working relation in the spirit of a future successful transaction.

  • Suitable legal form – legal form of a transaction generally will depend on founder’s personal preferences for asset ownership after transaction and founder’s vision for a company to be sold. While choosing a suitable legal form for a transaction, we pay special attention to how a founder plans to manage and invest personal assets but also how these assets shall be inherited by family members. For example, a family foundation may have many advantages to a business owner because it creates economically rational conditions for securing and managing personal assets with consideration of family interest.
  • List of potential buyers – a long list of investors is an important element of building value in a transaction, because it “gives a chance to obtain a higher price, especially if it leads to negotiations with several investors who will submit competitive proposals.” Despite this obvious statement, we also understand how important it is for each founder to choose the best possible investor for a company – every business owner who plans to exit the business wishes to leave the company in good hands, preferably without worrying about its growth prospects and future of its employees.
  • Company Valuation – it is a sales price for a business, which reflects fair market value of the company that can be expected to be paid by an outside investor in a marketable M&A transaction. The actions we take are the key to transaction because they enable us to test founder’s price expectation on one end and price attractiveness to potential investors on another. Thanks to our versatile approach to valuation, we are able to determine the optimal sales price range, which is usually higher than the initial founder’s expectations. To determine a realistic, achievable sales price theCFO team will:
    • analyse the company’s business model,
    • analyse historical financial data and identify necessary EBITDA and net debt adjustments,
    • assess company’s business plan for the next 3-5 years and how it may impact sales price or payment terms,
    • identify non-operating or private assets, which may be carved-out from a transaction, and
    • analyse transactional multiples achievable in similar transactions.

Marketing and transaction initiation

theCFO team prepares marketing materials in a manner that shows a business in a professional and convincing manner in order to draw investors interest. We contact long-listed investors and encourage them to participate in the process – as part of this we identify investors who have the strongest motivation to acquire our client’s business. This is a very important element of building transaction value, because “while carrying out transaction marketing, we try to effectively reach as many potential buyers as possible, whom we encourage to a possible transaction based on a transparent, credible and attractive message“.

Managing due diligence (“DD")

Once non-binding offers have been obtained from potential buyers and a preferred investor selected by our client, we stay in a “dialogue” with an investor and its advisors regarding issues and risks identified during due diligence investigation in order to stay in control of a transaction and also to safeguard company’s valuation and anticipated transaction key terms.

Negotiations and transaction execution

Negotiations can and most often will make for one of the most sensitive and challenging transactional steps, for which we prepare a right strategy. On behalf and with participation of our client, we conduct discussions and negotiations with investors from the very beginning i.e., from establishing the initial contact through to completion. The difficulty of negotiations is not only in legal or technical details but also in emotional dynamics between a business owner and an investor. Success of a transaction will depend not only on a purchase price or payment terms; non-financial issues that play a role often relate to how a business will be managed after a transaction, composition of a future management team and role of an founder in a company, non-compete expectations by a buyer or buyer’s views on company’s growth strategy after an acquisition. It makes sense to appoint M&A adviser who acts as objective expert and who can stand behind a founder throughout negotiations, especially while setting up negotiation boundaries and red lines. This is an important element of transactional success, because “defining a negotiation strategy, its boundaries and the red lines and writing them down brings a larger picture view to a founder in terms of negotiation priorities, which will make negotiation decisions simpler, faster and in the end more successful”.