M&A consulting in medium-sized companies - goals, tasks and success factors
As a professional M&A boutique, KP Tech Corporate Finance has been advising medium-sized companies from Germany, Austria or Switzerland on the sale of companies for more than 20 years.
In the Anglo-Saxon world, it has been a matter of course for many years for buyers and sellers of companies to engage an M&A advisor (M&A boutique). In the German-speaking world, on the other hand, the services of an M&A advisor are only used in about one in five transactions. To distinguish an M&A advisory from a business broker, a business broker or a business intermediary, we refer to our corresponding articles in this magazin.
Objectives when engaging M&A advice
- Transfer of knowledge based on many years of experience of the M&A advisor
- Professional management of the sales process and timely preparation of the client for the individual steps.
- External effect: Anyone who engages an M&A consultant shows the other side that they are acting professionally, that they mean business and that they are on an equal footing if the other party has also engaged an M&A advisor
- No mistakes: Due to many years of experience in M&A consulting, there are no mistakes when an M&A consultant is involved. As advisors, it is not uncommon for us to see the other party giving away several hundred thousand euros within a few minutes in talks and negotiations due to ignorance - and usually not even realising it!
- Neutral and qualitatively better company valuation: Due to the market knowledge of company valuation in the respective industry, the M&A advisor is able to argue an optimal valuation towards the other party. In combination with an optimal transaction structure, the M&A advisor very often achieves a significantly better valuation for his client.
- Optimal transaction structure: the M&A advisor shows various options in structuring a transaction, drawing on his many years of experience in M&A advisory. It is not uncommon for us to see the other party agreeing to a transaction structure that is unfavourable for them due to a lack of experience, even though a better solution would have been possible and negotiable.
- Facilitation: In contrast to the business broker, the mandated M&A advisor exclusively represents the interests of his client (the buyer or the seller). He is seen by the counterparty as a contact person also between personal discussions and negotiations. The M&A advisor thus represents a second communication channel and is thus in a position 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 negotiating positions in advance. One role of M & A advice that should not be underestimated is its function as a bad guy in negotiations. Our many years of experience in M & A consulting on both the buyer and seller side have shown that the moderation function contributes significantly to the success of an M & A transaction
- Workload reduction: Both buyers and sellers often underestimate the amount of work involved in the M&A process. Especially as a seller of a company, it is fatal if the operative business suffers due to the M&A process, which often lasts over 12 months. It is not uncommon for the intensive workload of the seller in the M&A process to result in a failure to meet the target figures communicated to the buyer, and thus in a not inconsiderable reduction in the purchase price.
- Better coordination of the persons involved: 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.
- Coaching: Every acquisition process as well as the process of selling a company is subject to strict confidentiality. By engaging an M&A advisor, sellers as well as buyers have the opportunity to discuss content, options and next steps.
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The M&A process when selling a company
- IDENTIFICATION OF POTENTIAL BUYERS
Search for suitable buyers - preparation of a long list and a short list - TEASER AND INFORMATION MEMORANDUM
Preparation of the teaser (= anonymised short profile) and the information memorandum (= comprehensive presentation of the company on 30 to 50 pages) - MANAGEMENT PRESENTATION
First personal meeting between seller and buyer - LETTER OF INTENT
Negotiation and signing of a Letter of Intent ("LoI"). The LoI contains the essential framework conditions such as purchase price, transaction structure, etc. and is the basis for the contract negotiations - DUE DILIGENCE
The potential buyer reviews all the company's documentation to identify opportunities and threats, strengths and weaknesses - NEGOTIATION OF THE PURCHASE CONTRACT
Negotiation of the purchase agreement (SPA) between seller and buyer - SIGNING
Completion of the company purchase at the notary - CLOSING
Conditions precedent must be fulfilled between signing and closing. With the closing, the shares are transferred to the buyer
Tasks of M&A advice in the event of a company sale
- Analysis of the shareholders' requirements
- Analysis of the company (internal due diligence) of the clients
- Identification of potential target companies (ideal profile - fit) - Long List/ Short List
- Creating the company presentation
- Drawing up the Information Memorandum
- Anonymous initial contact
- Obtaining the confidentiality agreements
- Preparation of the company valuation
- Advice on the negotiation of the Letter of Intent
- Preparation of data room and support of due diligence
- Development and negotiation of the transaction structure
- Contract negotiations (implementation and control; no legal advice)
- Control of the sales process. Creation of so-called market power for the seller
- Coaching in the M&A process
- Coordination of the work of the lawyers, tax advisors and banks until the signing of the contract
Tasks of M&A advice in the event of a company acquisition
- Assessment of the client's corporate strategy in the run-up to the company takeover
- Definition of the acquisition targets, the acquisition strategy and the acquisition criteria
- Planning and implementation of the search process. Development of the long list and the short list (target companies)
- Addressing the target companies ("targets")
- Drafting the letter of intent for the company takeover
- Development and negotiation of an optimal transaction structure
- Company valuation: Valuation of targets on the basis of various valuation models and procedures with the inclusion of existing transaction databases
- Coordination of due diligence as well as cooperation and management of auditors, tax advisors and lawyers until finalisation of the company purchase agreement
- Coaching in the M&A process/ sales process until the acquisition is completed
- Contract Negotiation/ SPA Negotiation: Active negotiator in contract negotiations (no legal advice)
Success factors in M&A consulting
- Many years of experience in M&A advisory
- Assertiveness and "toughness" of the M&A advisor in the M&A process; because in every M&A process there are ups and downs
- Detailed knowledge of the industry: Only M&A advisors who have extensive know-how of the respective industry are in a position to:
- identifying the right targets
- has extensive contacts with a large number of targets
- knows the current company valuations in this industry
- can assess the positioning of the client in the marketn
- understands the situation of the client and can assess the situation of the counterparty
For this reason, more and more M&A advisory firms are specialising in sectors. Such focused and professional M&A advisors are also called M&A boutiques. In contrast to investment banks, M&A boutiques advise small and medium-sized enterprises (SMEs) on the seller side. On the buy side, M&A boutiques differ from investment banks because of the personal advice they receive from a managing partner.
KP Tech Corporate Finance
As a professional M&A boutique, we advise either the buy side or the sell side. We would be happy to discuss with you in strict confidence the current company valuations in your industry as well as the opportunities and probabilities of success in the sale of your company. Contact KP Tech Corporate Finance in strict confidence either by phone +49 89 21 53 66 09-0 to arrange a personal and non-binding meeting. Benefit from more than 20 years of experience in international M&A and corporate finance consulting. Our team is on site for you in Munich - Berlin - Frankfurt am Main - Düsseldorf - Cologne.
