Successful mergers & acquisitions (M&A) but also divestments (sales of non-core activities) mostly serve to improve operating results, expand a company's capabilities and competencies, strengthen customer relationships and thus enable the expansion of customer and market segments. For such transactions to comprehensively strengthen a company and thus be considered successful, intensive preparations and the implementation of a structured M&A process are required. Essential success factors for an M&A function in a company are therefore:
1. Linking M&A strategy and corporate strategy.
The formal definition of the main objectives to be achieved in the context of an acquisition (M&A) or a divestment. This includes the definition of a target profile of a potential strategic partner in terms of size (turnover, employees, etc.), competences (products, know-how, focus, management, etc.) but also the basis for a later evaluation (keyword current trends). It is also helpful at this point to agree in advance on criteria that must be fulfilled in any case and criteria that can be set softer (e.g. turnover figures etc.).
2. Identification of value drivers and definition of a valuation scheme
This involves defining a catalogue of criteria for specific value drivers such as profitability, innovative strength, utilisation of market, innovative and product strength, but also classical figures such as capital employed, receivables, liabilities, fixed costs, vertical range of manufacture, etc.. An essential aid at this point can be a weighted catalogue of criteria that evaluates value drivers and possible corridors with the help of an evaluation scheme and thus contributes to a ranking of possible candidates on the basis of a points system.
3. Transparent decision-making processes
This involves a formal process that is comprehensible to those involved (M&A playbook). This contains the planned time schedule, the existing milestones and those to be achieved, as well as the departments and persons involved and acting. This not only facilitates internal management and control but also creates a basis for optimised cooperation for the contracting and negotiating partners.
4. Involvement of top management
The implementation of the M&A strategy is the task of top management. Necessary decisions of both the management levels and, if applicable, the controlling bodies make early and formal involvement necessary. A structured process and the involvement of the respective business units as well as external advisors and specialists facilitate the preparation of decision papers and the processing and clarification of any deal breakers in advance.
5. Experienced M&A team and/ or cooperation with external advisors and M&A specialists (e.g. in Germany, Austria, Switzerland)
In the context of an M&A transaction, the various parties involved (shareholders, lawyers, auditors) must be coordinated in terms of content and time. This coordination effort is usually significantly underestimated and requires an experienced M&A team or the support of an experienced external M&A advisor. Due to many years of experience in M&A consulting, the involvement of an experienced M&A advisor does not lead to mistakes and due to the market knowledge of the company valuation in the respective industry, the M&A advisor is able to argue an optimal valuation towards the other party. In contrast to a business broker, an external M&A advisor exclusively represents the interests of his client. He is seen by the other party as a contact person also between personal discussions and negotiations. The external M&A advisor thus represents a second channel of communication and is thus able to clarify misunderstandings that have arisen, resolve hardened negotiating positions, remove emotions from the M&A process, accelerate the M&A process and sound out different negotiating positions in advance.
KP Tech Corporate Finance Advisory (Germany, Austria, Switzerland): How we help you make a success of company acquisitions
Looking to expand in a German-speaking country, elsewhere in Europe or beyond? Looking for a suitable company to invest in? Buying a company opens the door to new realms of opportunity, but it’s also one of the riskiest decisions a business will ever make. To ensure it also spells success as an investment, we provide you with professional M&A advisory at every stage of the project – based on a modular approach to M&A consulting.
Over the last 20 years, we have advised many international companies on company acquisitions in Germany, Austria and Switzerland. Our clients have included Cognizant (USA), Constellation Software (Canada), Claranet (UK), HCL (India), Singapore Technologies (Singapore), Reply (Italy), Sopra Steria (France) and many others.