Paths to success after Corona

Erfolg nach Corona - Success after Corona

Money is not enough to ensure suc­cess after Corona. Facil­it­ated loans and deferred pay­ments only provide liquid­ity. Suc­cess requires resi­li­ence, a busi­ness mod­el with a func­tion­ing sup­ply chain, effi­cient oper­a­tions and prof­it­able sales to cus­tom­ers a swell as a sol­id cap­it­al struc­ture. Com­pan­ies and busi­ness units well-posi­tioned in the value chain could gain mar­ket share as a res­ult of the dis­lo­ca­tion, accel­er­ated tech­no­lo­gic­al devel­op­ment and online shift of busi­ness mod­els. Oth­ers will have to repos­i­tion them­selves. Sim­pli­fic­a­tions in insolv­ency law can help also to pro­tect the healthy.

Closing the deal

Selling a business, Part IV

After Mar­ket­ing the busi­ness, bind­ing offers terms will be ana­lysed on the way to a suc­cess­ful Deal Clos­ing.

If a com­pet­it­ive bidding/auction pro­cess is main­tained, final bids will fol­low fur­ther due dili­gence and there might often be no let­ter of intent. How­ever, at a cer­tain point of the pro­cess buy­ers might insist on exclus­iv­ity / pre­ferred bid­der status for a cer­tain peri­od or cost cov­er­age before enga­ging in intens­ive due dili­gence and bilat­er­ally agree terms on a detailed and nego­ti­ated let­ter of intent LOI / Term Sheet. This is reas­on­able but locks in the seller for a peri­od related to the time to com­plete due dili­gence, which will be much short­er, if a vendor or sell-side due dili­gence has been made in advance, redu­cing thus the risk of a hic­cup and increas­ing the chance of main­tain­ing altern­at­ive bid­ders’ interest.

Less uncer­tain­ties and ready con­firm­a­tion about the accur­acy and reli­ab­il­ity of provided inform­a­tion should also pos­it­ively affect a poten­tial buyer’s read­i­ness to pay a high­er price.

The nego­ti­ation phase will typ­ic­ally start from the SPA draft provided by the seller and the terms of the final bids or the care­fully agreed LOI. The most con­veni­ent deal struc­ture will be addressed con­sid­er­ing many factors such as law, tax­a­tion or reg­u­la­tions: asset deal vs. share deal vs. mer­ger, acquis­i­tion vehicles, carve-outs, etc.

Deal Closing

Terms will address not only the shares or assets to be trans­ferred, but many addi­tion­al points such as clos­ing con­di­tions, rep­res­ent­a­tions and war­ranties to assure such as com­pli­ance of data provided dur­ing due dili­gence with real­ity or assur­ing that no work­ing cap­it­al is diver­ted or pre­vent­ing leak­age of oth­er assets before deal clos­ing date (locked box), defects rem­ed­ies and not least the terms of pay­ment.

Pay­ment terms lead to import­ant con­sequences after deal clos­ing:

  • Cash – with no strings attached.
  • Debt to be raised – you’ll have to sup­port that step
  • Vendor fin­ance
  • Instal­ments
  • Earn out – you’ll still depend from the fate of the com­pany
  • Exchan­ging Shares – you might have to keep them for some time

Once all terms are agreed and the con­tract signed, clos­ing con­di­tions will have to be ful­filled and pay­ments terms might affect you, but your com­pany and its integ­ra­tion or restruc­tur­ing is now some­body else’s busi­ness.

If you would like to sell a com­pany, con­sult us, we’ll be glad to help.

Market the deal

Selling a business – Part III:

We can mar­ket the deal after pre­par­ing the busi­ness for sale. We shall bring the oppor­tun­ity to the mar­ket main­tain­ing con­trol of the pro­cess and the dis­tri­bu­tion of inform­a­tion, while motiv­at­ing bid­ders along par­al­lel paths on a level play­ing field in case of a broad or restric­ted auc­tion, or even lim­it­ing it to an indi­vidu­al pro­cess, accord­ing to your require­ments.

Even if flex­ib­il­ity and read­i­ness to amend pro­cess and papers is neces­sary, a dis­cip­lined approach requires best pos­sible pre­par­a­tion and exclus­ive rep­res­ent­a­tion. Any com­prom­ise on such ini­tial decisions is a trade-off pos­sibly affect­ing the out­come for the seller.

The normal procedure to market the deal is to:
  • Con­tact buy­ers with a reduced but strong no-name sum­mary focused on stra­tegic and quant­it­at­ive key ele­ments. Spe­cial­ized data banks are gain­ing import­ance to expand reach and com­pet­i­tion bey­ond the spe­cif­ic researched buy­ers list.
  • Agree con­fid­en­ti­al­ity (also referred as NDA, CU, NCND).
  • Deliv­er the detailed Offer­ing Memor­andum (also IM, CIM)
  • Fol­low up, com­plete inform­a­tion, arrange inter­ac­tion with man­age­ment. The bet­ter the Offer­ing Memor­andum, the less­er the man­age­ment dis­trac­tions, delays and dif­fer­ence in pro­spect buy­ers’ treat­ment. At this point there might still be many parties inter­ested in receiv­ing inform­a­tion.
  • Receive non-bind­ing indic­a­tions of interest. These uni­lat­er­al indic­a­tions which are some­times referred as let­ters of intent (LOI) too, shall con­tain inform­a­tion about the real interest, fit and abil­ity to execute the trans­ac­tion.

In the mean­time, inputs from buy­ers’ inquir­ies and from indic­a­tions of interest help com­plete the Data Room extent and pre­par­ing man­age­ment present­a­tions.

At this point, strongly inter­ested parties on the short list will be gran­ted access to the Data Room, pro­ceed to face-to-face meet­ings, man­age­ment present­a­tions, or some­times even site vis­its and be invited to sub­mit final bids pos­sibly based on a draft trans­ac­tion struc­ture or even a draft sale agree­ment, or a share pur­chase agree­ment (SPA).

Bring­ing to the mar­ket the deal, have assumed a bid­ding / auc­tion pro­cess while also easi­er and more con­fid­en­tial but less max­im­ising bilat­er­al pro­cesses with single coun­ter­parties are com­mon too.

More details about how to sell a com­pany are approached in the next post. If you have ques­tions, con­sult us, we’ll be glad to help.

M&A – Criteria and timeline

Selling a business – Part I:

The timeline selling a busi­ness and the cri­ter­ia to achieve best res­ults influ­ence your decision to sell your com­pany or parts of it.

Selling your com­pany is often an emo­tion­ally charged once in a life­time decision. You will bene­fit from hav­ing a pro­fes­sion­al along­side you that man­ages the pro­cess and does the work leav­ing emo­tions aside.

The pro­cess includes a few import­ant steps, which should be fol­lowed to optim­ise chances for a suc­cess­ful trans­ac­tion, meet­ing object­ives such as to:

  • Max­im­ize value for the seller
  • Meet stra­tegic restric­tions
  • Main­tain busi­ness value
  • Keep pro­cess under con­trol
  • Do not over­bur­den man­age­ment
  • Do not dis­rupt oper­a­tions
  • Main­tain employ­ment
  • Retain key per­sons

Pro­fes­sion­al sup­port helps defin­ing real­ist­ic terms and adds neces­sary resources to your man­age­ment, account­ants, tax pro­fes­sion­als and law­yers to mas­ter the pro­cess. Such sup­port is typ­ic­ally provided by invest­ment banks, M&A advisers and busi­ness brokers. They can help you pre­par­ing the com­pany for sale, under­stand­ing the effect­ive value of the busi­ness or its assets, high­light the most valu­able aspects, access buy­ers, gen­er­ate par­al­lel com­pet­i­tion, flex­ibly design an adequate trans­ac­tion struc­ture and min­im­ize oper­at­ive dis­rup­tions and delays anti­cip­at­ing due dili­gence and valu­ation issues. Bring­ing resources, rig­or and pro­fes­sion­al expert­ise to the pro­cess doesn’t come free, and, as usu­al, you will get what you pay for. The final sale res­ult depends on how the whole pro­cess is man­aged.

Once you man­date an M&A adviser, you will gen­er­ally have a few intens­ive months before execut­ing the trans­ac­tion.

Timeline selling a business:
  1. Pre­par­ing the busi­ness for sale – can be very swift, if the busi­ness is trans­par­ently struc­tured and doc­u­mented or take quite long if it isn’t.
  2. Mar­ket­ing the busi­ness – might take a few weeks, depend­ing also on the strategy and the avail­ab­il­ity of buy­ers.
  3. Select­ing indic­a­tions of interest and fol­low­ing up with data and meet­ings – might take some weeks, depend­ing from the qual­ity of inform­a­tion and avail­ab­il­ity of buy­ers.
  4. Gen­er­at­ing com­pet­i­tion through such as a struc­tured auc­tion to receive bind­ing bids and draft­ing the trans­ac­tion struc­ture – can be very swift, once buy­ers have been sat­is­fact­or­ily informed.
  5. Mas­ter­ing due dili­gence, final nego­ti­ation and clos­ing – might take weeks to months, depend­ing from its com­plex­ity and data qual­ity.

Delays to the expec­ted timeline selling a busi­ness are rel­at­ive to the chosen setup, if days become weeks, weeks can become months. Hic­cups lurk at each step, espe­cially if the ini­tial pre­par­a­tion is not accur­ate. We will have a look at them sep­ar­ately. Of course, some short­cuts can make sense in cer­tain cases, but the prin­ciples should apply to most cases, includ­ing to the selling of major prop­er­ties.

Arranger helps you to => get Attention => create Attraction => pass Analysis => execute Agreements

More thoughts about how to sell a com­pany will fol­low. If you have ques­tions, con­sult us, we’ll be glad to help.