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Benefits of the valuation football field

As we plan the sale of our business, it is essential to calculate its value, so we understand what price we should expect and know the scope of our area of play when the time for negotiation comes.

Using multiple valuation methods and comparing the results is what we call the valuation football field. The combination of numerous methods of valuation is a helpful tool that gives us an overview of what your company could be worth, depending on the perspective of each method. This will come in handy when negotiating with your potential buyer and getting the best possible price for your company.

Valuating a company is not an exact science

It is difficult to pinpoint the actual value of a company. The football-field-style graphic below in the form of a floating bar chart can help summarise a company’s various ranges of value determined by several methods of appraisal and observe the possibilities when negotiating.

For example, imagine your company’s current price is 350M, but you want to know its value. When applying the valuation football field, we notice that, depending on the valuation method, the value ranges show how high can the price for your company be, letting you know how much potential leeway you’ll have when negotiating with the buyer.

This graphic shows that each valuation method has resulted in a different value range, with the highest at lowest being 50M above the current price and a 500M ceiling. This means that you could get as much as 500M for your company, representing 150M over its current price.

You may be interested in How to value a company.

How can the valuation football field work in my favour?

During the valuation of your company, you are estimating its value. You have available a plethora of methods that can determine a value range of what your company may be worth. Using only one of these methods may provide a narrow view of what your company is worth, like a horse wearing blinders, utterly unaware of its surroundings.

It’s like negotiating based on one valuation method and then realising that you could’ve arranged almost 25% more for your company if you had used the valuation field. Imagine you’re a general; would you rather have intel informing you about one of your enemy’s strategies or as many strategies as possible? This is what the valuation football field provides, as much conceivable value ranges as possible.

In the end, these are all assumptions; as we’ve stated before, science is not exact. The benefit of the valuation football field is that it helps you reduce the margin of error when valuating your company and help you in the decision-making when selecting the best valuation method to get the best possible price for the sale.

What valuation methods can I apply to the valuation football field?

Your valuation football field’s size will depend on how meticulous you want to be in your overview of the different valuation methods. Each method’s result may vary from one another.

Comparable Company Method (CCA)

This is when you evaluate your company’s value by utilising the variables that companies similar to yours have. Use this to determine their value, like sector, size, growth rate, margins, and how profitable they are.

Comparable Transaction Method (CTA)

This method involves analysing and estimating your company’s value by comparing prices paid in transactions for similar companies.

Discounted Cash Flow (DFC)

Using this method of appraisal you will determine the company’s value based on its future cash flows. You apply a discount rate to each year’s projection to calculate the result according to the present value of money.

For example, $1 today is worth $1, but a projected cash flow. In five years of $5 with a discount rate of 0.683 tells us that those $5 today are worth $3.4.

Free Cash Flow (FCF)

Contrary to DCF, this is the value of a company based on the net profit. Meaning the amount the company generates after accounting for the costs of operations and maintenance of capital assets.

For example, if a company has a cash flow of $10 and spends $3.5 to stay in business. The remaining $6.5 is free to be reinvested.

Leveraged buyout (LBO)

This projects its value by analysing the contributions made by the alternative sources to the net Internal Rate of Return.

Breakup Analysis (BA)

With this you look at your lines of business, which means that its components’ determine your company’s value.

You may be interested in: Why is a company valuation important?

Make sure you get the best price for your company

Changing how much you get for your company will depend on the valuation process. A company that does not go through the preparation process is very likely doomed to fail. To avoid this, we’ve compiled in our e-book, “Errors during the sale of a company: The Preparation”, the most common mistakes entrepreneurs make when preparing their companies for sale.

Top 5 Biggest M&A deals of 2022 so far

Global M&A activity in 2021 easily surpassed the pre-pandemic level and nearly matched the peaks of 2015 and 2007. The number of announced M&A deals exceeded 62,000 globally in 2021, up an unprecedented 24% from 2020. The boom in the M&A sector has certainly continued into 2022 and according to Morgan Stanley´s M&A bankers, all the elements that drove 2021’s record activity remain in place.In this article, we’re looking over some of the biggest M&A deals in 2022 so far.

5. Take-Two Interactive pays $12.7 billion for FarmVille developer Zynga

Take-Two Interactive has announced the purchase of mobile gaming giant Zynga for $12.7 billion in cash and stock, the latest blockbuster acquisition in a succession of large mergers in the video game industry.

With $6.1 billion in pro-forma Net Bookings for the trailing twelve-month period ended September 30, 2021, this transformative combination unites two global leaders in the interactive entertainment business and establishes Take-Two as one of the largest and most diverse mobile game publishers in the industry.

Why not have a look at the biggest M&A deals in 2021 here!

4. TD Bank to acquire First Horizon FOR $13.4 billion

TD Bank Group and First Horizon Corporation announced that they have signed a definitive agreement for TD to acquire First Horizon. The acquisition will be completed in an all-cash deal valued at US$13.4 billion, or US$25.00 per First Horizon common share.

Bryan Jordan, President & CEO, First Horizon comments on the transaction “This partnership with TD Bank creates extraordinary value for our shareholders and provides our clients with a broader product set and advanced technology. We have long respected TD Bank as a leader in U.S. banking and are confident that their additional investments in our local markets will accelerate growth and enhance our long history of community support.”

3. Vista Equity Partners, Evergreen Coast Capital Acquire Citrix for $16.5 Billion

Vista Equity Partners and Evergreen Coast Capital Corporation have entered into a definitive agreement to acquire digital workplace solutions provider Citrix in an all-cash transaction valued at $16.5 billion.

Vista and Evergreen intend to combine Citrix and TIBCO Software, one of Vista’s portfolio companies. TIBCO delivers enterprise data management, assisting enterprises in connecting, unifying, and anticipating business outcomes. Citrix provides a secure digital workspace as well as an application delivery suite. To assist in navigating the hybrid workplace, TIBCO provides real-time intelligent data and analytics capabilities.

2. Elon Musk to acquire tech giant Twitter for $44 billion

After initially rejecting Elon Musk’s overtures, Twitter’s board of directors said on Monday 25th of April that it will accept Musk’s $44 billion offer for the firm, putting an end to a weeks-long dispute over whether the company would accept his unsolicited proposal.

However, Elon Musk recently tweeted saying that he is putting his bid to acquire Twitter on hold, weeks after agreeing to take the company private in a $44 billion deal.

Musk first proposed the $54.20-per-share transaction on April 14, sparking a frenzy of speculation among Twitter executives and Wall Street analysts about whether Musk was serious. He was, as it turns out, very serious: Musk revealed the money for the proposal, which totalled $46 billion in equity and loans arranged by Morgan Stanley.

The Tesla owner spoke on the transaction saying “Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated,” Musk said in a statement. “I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spambots, and authenticating all humans. Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it.”

1. Microsoft acquired Activation Blizzard for $68.7 billion

 On January 18th 2022, Microsoft acquired Activision Blizzard for $95.00 per share, in an all-cash transaction valued at $68.7 billion, inclusive of Activision Blizzard’s net cash. This deal was a significant step toward Microsoft’s entry into the gaming market.

Microsoft became the world’s third-largest gaming company by revenue, behind Tencent and Sony.

The acquisition includes iconic franchises from the Activision, Blizzard and King studios such as “Warcraft,” “Diablo,” “Overwatch,” “Call of Duty” and “Candy Crush,” in addition to global eSports activities through Major League Gaming.

Bobby Kotick will remain CEO of Activision Blizzard, and he and his team will continue to lead efforts to develop the company’s culture and accelerate business growth. After the transaction is completed, the Activision Blizzard business will report to Phil Spencer, CEO of Microsoft Gaming.

To conclude, global M&A activity in 2021 saw record highs and many were sceptical as to whether this would continue into the following year. However, the boom in the M&A sector most certainly has continued. Looking at the biggest M&A deals of 2022 so far we can clearly see a strong majority of transactions in the gaming and tech sector, showcasing how eager companies are to adapt to the digital environment.

Did you find that interesting? Read our article on 2020´s biggest M&A deals here.

biggest M&A deals of 2022 so far
Belgian MAZARO trading Euronext

MAZARO’s IPO : a source of inspiration for capital-intensive scale-ups & SMEs

On March 8, Belgian firm MAZARO started trading on Euronext Access Brussels following a successful crowdfunding campaign and private placement where 3.7 million euros were raised. Furthermore, MAZARO became the first “crowdlisting” on Euronext Brussels.

MAZARO is an automotive engineering firm that devised and patented a completely new transmission system for a variety of cars, auxiliary, and industrial applications. MAZARO’s goal is to research and optimize the whole driveline for the typical driving cycles of vehicles or industrial applications.  With over 25 years of transmission design and development experience, the company has developed subsystems and components, as well as selected sensors and purchased parts to be used in their new designs.  They are constantly improving their products by generating new solutions. Filip De Mazière is the creator of MAZARO’s technology, as well as the company’s co-founder and director. For over 25 years, he has been developing transmissions and clutches for major manufacturers of high-end sports cars, passenger automobiles, off-highway vehicles, and material handling equipment.

MAZARO’s decision to go public was not unexpected. Small-cap IPOs are more suited to firms with innovative operations and R&D cycles , such as MAZARO, than to companies with more traditional operations. For example, for a fashion retailer to be relevant, the IPO must be much greater than for an Artificial Intelligence company.

Furthermore, going public will help the company fund its future growth and development. Some examples of how it can do this include financing research, diversifying and expanding its sources of finance, promoting the firm, and benefiting from a market price. Going public will also boost MAZARO’s exposure and credibility by attracting new partners, contracting with new suppliers, and making it easier to recruit and retain staff. Finally, IPOs will help safeguard the managerial autonomy of MAZARO´s founders as it fragments the shareholder structure.

Given the overriding advantages of going public, MAZARO decided to raise funds through a crowdfunding campaign in order to ensure that they could be listed. Crowdfunding is a great option for smaller entrepreneurial companies that need to build both brand awareness and capital. This is exactly what MAZARO managed to achieve through its crowdfunding campaign with Spreds, a Belgian SaaS platform for the digital management of stakeholders.

Initially, the company had set out to raise 500,000 euros for its Initial Public Offering (IPO) however, due to the fact the capital raised during crowdfunding exceeded expectations the limit was raised to 800,000 euros. On the 7th of January, this amount was reached and the first part of MAZARO’s IPO on the Access market had been completed.

Following the success of the crowdfunding campaign, MAZARO went on to raise €2.9 million (incl. €700,000 in the context of authorised capital) from private placement investors. This is the first time that a crowdfunding operation, a private placement and an IPO have been combined in Belgium. Guy Van der Heyden, Managing Director at ONEtoONE explains that “the interest of this formula is to create more liquidity. If we were to limit ourselves to a private placement, we would have had about fifteen shareholders at the time of the IPO. Thanks to crowdfunding, the company began its stock market journey with more than a hundred shareholders, not counting the candidates who subscribed to the crowdfunding round and were not able to provide funding due to the limit imposed.”

Mazaro

Finally, this provided MAZARO with a direct listing on Euronext Brussels’ Access market, which is targeted for SMEs and gives small-cap IPOs simplified access to capital markets. The combination of crowdfunding and a listing on Euronext Access will boost the liquidity of MAZARO’s shares for all crowdfunding participants. Euronext access will serve as a stepping stone for MAZARO and emphasize the firm’s promising future ahead. This assumption can be made based on factual success stories. Direct Energies, for example, began trading on Euronext Access in 2004 with a market capitalization of 18 million euros, and by 2018, the firm had been acquired by Total Energies and is now valued at more than 1.9 billion euros. In the meantime, MAZARO transferred from Euronext Access to Euronext Growth in 2005 (at a market capitalisation of c. €100m) and from Euronext Growth to the regulated market in 2015 (at a market cap. multiplied by close to 8x: €775).

To sum up, MAZARO’s formula combining crowdfunding, private placement, and IPO is a first in our latitudes and may encourage small innovative and highly entrepreneurial companies to break the bias and gain the recognition they deserve The Belgian financial newspaper L’Echo describes MAZARO as “a source of inspiration for others.” Filip De Mazière, CEO of MAZARO comments on the transaction:  “In the run up to our listing on Euronext Access, we successfully raised €800,000 from retail investors through a crowdfunding campaign. In addition, we collected an extra €2.9 million from a series of private investors who believe in the added value and high commercial value of MAZARO´s technology. We sincerely thank all investors for their trust. With their support, we are ready for a bright future with a great, positive impact on our environment.”

Media coverage

MAZARO’s achievement drew a lot of media attention from all around the world. A brief video of ONEtoONE manager Guy Van der Heyden being interviewed on Belgian TV station LN24 is linked below. This part of the programme discusses the listing of “small” SMEs, as well as MAZARO’s history and how it came to be listed on the Euronext stock exchange.

Link to video: Success stories: Euronext, mise en bourse des petites PME (ln24.be)

The Banker also recently published an article outlining the stages involved in MAZARO’s listing and crowdfunding procedure. Reporter Shanny Basar discusses how being listed increases visibility and should serve as an incentive for other capital-intensive scale-ups and SMEs.

Click here to read the full article.

ONEtoONE advises Italian company TINEXTA S.P.A. on its acquisition of 70% of Spanish company Evalue Innovación through Warrant Hub.

ONEtoONE advises Italian company TINEXTA S.P.A. on its acquisition of 70% of Spanish company Evalue Innovación through Warrant Hub.

Tinexta, acquired Evalue Innovación for 20.6 million euros. As a result of the acquisition, Tinexta has now become the majority shareholder in the company.

Tinexta is a leading provider of Digital Trust, Cyber Security, Credit Information & Management services. Listed on Euronext Milan – STAR segment, the Tinexta Group closed its 2020 consolidated financial statements with revenues of 269.1 million euros, EBITDA of 77.9 million and net profit of 37.9 million.

The Valencian consultancy firm Evalue Innovación, specialises in advising on tax incentives for R&D&I and is one of the leading Spanish consultants in obtaining European, national and regional funding and public aid for innovation. After the transaction, the firm will continue to retain its own brand, team and management, as well as its business strategy.

This acquisition means Tinexta can now grow further in the Spanish market as Evalue Innovación has an extensive presence throughout Spain with offices in Valencia, Madrid, Barcelona, Seville and Murcia.

Chairman of Tinexta, Enrico Salza, comments on the deal, saying: “the Tinexta Group is continuing to grow abroad, acquiring dimensions that make it more and more a market player in a position to dialogue with major international corporations”

The transaction was advised by a team led by María José Martínez Gil, Federico Forchielli, Pedro Moragues Prieto and Fabio Lupo.

A massive well done to our ONEtoONE team!

If you would like more information on how we can help you with the sale of your company, do not hesitate to contact us.

What is a subsidiary?

You might be completely unaware that some of your favourite companies are actually just a small part of a huge conglomerate.  The biggest fashion brands, food, and social media companies are more often than not subsidiaries to a much larger organization. But what actually is a subsidiary? Keep reading to find out.

How can we define a subsidiary?

A subsidiary is a type of business entity or corporation that is solely owned or partially controlled by another company known as the parent company. The proportion of shares owned by the parent company determines ownership, and that ownership stake must be at least 51 percent.

What qualities do subsidiaries have?

A subsidiary is a separate and independent business entity from its parent firm. This is beneficial to the corporation in terms of taxation, regulation, and responsibility. Separate from its parent, the subsidiary can sue and be sued. Its liabilities are normally their own, and the parent firm is usually not liable for them.

The parent firm will have the requisite votes to establish the subsidiary’s board of directors if it owns at least 51 percent of the subsidiary. This allows the parent company to have a say in how the firm makes decisions.

Sub-companies and their parents do not have to be in the same area or have the same type of business. Subsidiaries may also have their own sub-companies; the line of succession forms a corporate group with varying degrees of ownership.

 What are the advantages and disadvantages?

Advantages

  1. Tax benefits: A parent company’s tax burden can be significantly reduced thanks to state-allowable deductions. For parent firms with several subsidiaries, the income obligation from profits earned by one subsidiary can frequently be mitigated by losses in another.
  2. Risk reduction: Given that it establishes a separation of legal entities, the parent-subsidiary model reduces risk. Losses incurred by a subsidiary do not readily transfer to the parent. In case of bankruptcy, however, the subsidiary’s obligations may be assigned to the parent if it can be proven that the parent and subsidiary are legally or effectively one and the same.
  3. Increased efficiencies and diversification: Creating subsidiary silos can help a parent firm achieve improved operational efficiency by dividing a huge corporation into smaller, more manageable entities.

Disadvantages

  1. Limited control: If a parent’s subsidiary is partly controlled by other companies, managerial control difficulties may arise. This is as a result of matters having to be decided through the parent bureaucracy’s chain of command before any action can be taken. Decision-making ultimately becomes a lengthy and tedious process.
  2. Legal costs: Lengthy and costly legal paperwork burdens result, both from the formation of a subsidiary company and in filing taxes.

Meta platforms: example of a subsidiary structure

Facebook, more recently known as Meta, is a well-established parent corporation in the digital industry. It has several investment portfolios in other firms in the social media sector and is the parent company of several software technology sub-companies as well.

Some examples of Meta sub-companies are Instagram, WhatsApp, Oculus VR ad Giphy. Each of these sub-companies are extremely successful in the tech/social media world.

Skycrapers - Modern business

Understanding 21st Century Business Models: Part 10 – Valuing 21st Century Businesses.

As we have said at the beginning of this series, 21st Century businesses require a new way of valuing them. Also, since their DNA is to grow exponentially, making profits might not be in their current radar. So, to value these companies, we need to understand and take the metrics that best drives value for them. These drivers will eventually directly affect cash flow generation when these companies mature.

Performing a valution:

Our intention with this part is not to provide a valuation master class, but to explain how to identify these value metrics and why.

Why do we perform valuations on a business?

  • To go through a company sale process
  • Raise capital
  • Financial planning
  • IPO
  • Bankruptcy
  • Acquire a business
  • Make investment recommendation (buy/sell/hold)
  • Internal business decision making
  • Valuing employees´ compensation and options
  • Litigation processes.

As seen, a valuation is done to address many company situations and at different stages. There are many accepted valuation methods that can be applied. None of them is a straightforward winner when it comes to choosing one. It depends on many things. Hence, it is said that a valuation is both art and a science.

All of the above are just a few things that need to take into consideration when valuing a company. Furthermore, valuing a 21st Century company require of more art than science.

 Valuation, in any business is based on expected future performance not past performance and involves:

  • Financial analysis
  • Market and operation architecture projections to establish financial conclusions
  • Industry and economic analysis
  • Applying generally accepted valuation methods

 A UNIVERSAL RULE- The market dictates the value of a company. A valuation is a way to back arguments. So, it is in the eye of the beholding valuator that the true valuation approach is selected. Usually, various valuations methods are used to assess each argument. It is regularly represented in what is known a Football Field graph.

Valuation applied to 21st Century Business Models

21st Century businesses are called that because most of them started operations this century. The vast majority of them, as expressed in the Introduction part of this series, have not reached maturity yet. In fact, at least the ones that belong to the models explained in this series, many of them are still in growth stages.

As seen in the graph above, growth company barely generate profits, and sometimes negative cash flows. Does that mean that these companies are failing? NEGATIVE. By now, we should understand that the real value of these companies is in the continuous increase of their customer / userbase, with a credible thesis that this will convert into a cash flow generating machine in the long run. While engaging customers / users, 21st Century companies test various revenue generating ideas until they hit jackpot.

Based on this, the valuation methods that are best applied to 21 Century businesses are market approach methods. There could be times when cost approach methods are applied, especially when valuing a technology or certain intangibles.

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By now, I hope, we can all agree that 21st Century Business Models need a new way of being analysed and understood for their true value. It is important for all players in the economic ecosystem around them to have a common communication channel. Investors and corporations, that invest and acquire 21st Century companies, need to understand the value that they present, present and future. After all, they will be analysing their return on investment. On the other hand, entrepreneurs need to communicate their company’s value in a way that the investor or acquiror will perceive the value of their investment.

21st Century Business Models are aligned with the digital age. Hence, although there are many new business models, we have covered the most relevant as of 2021. We have explained how new customer demand and behaviour in a customer driven age drive the success of these models. How they add value to customers and how this value is portrayed in business analysis, converted into kip’s and translated into a financial language, so that investors and entrepreneurs are able to communicate about the value of a certain company.

Our goal has been always to show how to understand 21st Century business models in order to perform valuations that grasp the companies’ real value. In most cases, and due to the drivers expressed, the value lies in the very first lines of the P&L. This is all related to, what is more related to the customer itself, revenues, and COGS. This value is better explained in the assumptions that result in the upper lines: revenues, gross margins, contribution margin and cost of customer acquisition. If we understand how a business addresses customer needs, how it manages or project these upper line economics and how the KPI’s that are communicated, then it will all make sense. If you were a 21st Century Business Model valuations’ sceptic, and now you understand what drives their valuation, our job has been gratified. If you are an entrepreneur and you have learned how to communicate the value of your company, we will both succeed. If you would like to extend the conversation, learn more or are thinking of pursuing a corporate operation that involves the acquisition or fundraising process of a company with a 21st Century business model, I will be more than happy to do so. You can contact me at [email protected].

Aknowledgements

There are countless people who I need to be thankful to. I have been interested in the financing stages of both new and growth projects since the beginning of the 2000’s. Have had many mentors, along the way. One of them, late Cesar “Tito” Montilla, who mentored me in many things regarding corporate finance, who showed me that knowledge was meant to be spread and to find ways to express what I am knowledgeable of. To my wife, who pushes me to find the better version of myself. To Laura Catalán and her team, for encouraging me and laying out my blog posts and ebook. To the ONEtoONE Corporate Finance team and their support. To all of you, Thank You!

Entendiendo los modelos de negocio del siglo XXI: Introducción

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Keys to Search Fund performance – Enrique Quemada

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For the last few years, we have been witnessing the rise in popularity of Search Funds in Europe (and especially in Spain) thanks to a dynamic virtuous circle of an ecosystem with more and more Searchers, target companies, investors, and funders. Some readers have asked me how do you get it? In this article, I explain the four keys to such impressive returns for the investor.

No other asset generates such a high return with moderate risk.

It is due to the participation of four players, which have been fundamental to obtain average annual returns of 30%.

Let’s talk about the four pillars:

1. THE SEARCHER

A young person over 30 years old, with an excellent education (usually a prestigious MBA), with professional experience in very demanding firms such as big strategy consulting firms or investment banks, highly motivated to become an entrepreneur.

He no longer wants to work as an employee. He is at the peak of his professional life, at the height of his energy, and when you see him, you know that he will be successful in whatever he undertakes.

2. THE INVESTOR

Between 10 and 15 investors/advisors very experienced in business management accompany the Searcher in the company’s management.

The Searcher has with these investors a luxury Board of Directors formed by experts in venture capital, investment banking or former presidents of large companies, ordinarily inaccessible to SMEs of this size.

3. THE FINANCIERS

Today, a financial community of banks is willing to finance up to 50% of the acquisition.

These financial institutions need good projects to finance. They have become familiar with the model and its good results over the last few years. Moreover, they have overcome their initial reluctance to finance small SMEs, supported by the criteria of expert investors who invest their own equity in these companies.

The entrepreneur himself usually also finances the deal by accepting deferred payments and sometimes reinvesting part of the money he receives in the company.

4. THE TARGET COMPANY

Search Funds focus their efforts on identifying healthy companies, with understandable business models, with a defensible market position, without a high concentration of clients and with growth.

Target companies typically have more than five million euros in turnover and an EBITDA of more than one million euros. They have healthy EBITDA margins, typically above 15%, low CAPEX investment requirements, low working capital requirements and strong cash flow generation.

Find out more about Search Funds here

 Historically, the average company acquired by the Search Companies has had sales of $8 million, Ebitda of $2.4 million, and acquired at an average price of 5.6 times EBITDA.

The Searcher (1) buy at an attractive multiple, thanks to the scarcity of competitors in the purchase, (2) increase sales thanks to the Searcher’s commercial energy and international capacity, (3) improve margins, given that these types of companies are usually not optimized, (4) make add-ons that change the size of the company, (5) make a professional sale process of a company that has increased its EBITDA to the level where they already buy at high multiples (6) thereby benefiting from the arbitrage of multiples.

We are in a virtuous ecosystem with more and more searchers, target companies, investors and financiers.

There are more and more young MBAs, who, instead of being part of the machinery of big business, prefer to follow the path of the Searcher and become entrepreneurs, masters of their destiny and, probably, millionaires.

Find this article on LinkedIn here

Top 5 Biggest M&A deals of 2021

With 2021 coming to a close, we’re taking the time to look back on some of the biggest M&A deals of the year so far.  2021 has been a very successful year for global M&A activity. All of these huge deals are likely to have a significant impact on their respective industries in the years to come.

The biggest M&A deals in 2021:

5. US17.4 billion acquisition of PPD by Thermo Fisher Scientific Inc.

This partnership brings together Thermo Fisher Scientific, a pioneer in scientific instruments with a leader in clinical research services (PPD). Synergies are estimated to total around $125 million as a result of the purchase. It also establishes a foothold for Thermo Fisher Scientific Industries in the $50 billion clinical research market.

 4. US20 billion acquisition of Nuance Corporation by Microsoft

Microsoft’s $20 billion purchase of Nuance Corporation provides it a significant presence in the healthcare industry. According to Microsoft, the target company’s products are utilized by more than 55 percent of physicians and 75 percent of radiologists in the United States, as well as 77 percent of hospitals in the country. As a result, it’s a great purchase for Microsoft Cloud for Healthcare, which was launched in 2020 and is Microsoft’s attempt to apply its industry-specific cloud approach to the healthcare sector. It paid a premium of 23% above Nuance’s stock price.

Why not have a look at 2020´s biggest M&A deals?

 3. US$22 billion acquisition of Deutsche Wohnen by Vonovia

In May, Germany’s largest residential property business launched a bid for the country’s second-largest residential property business. The deal is still the biggest in Europe so far this year. When the two companies merge, the new company will have ownership of almost 500,000 properties. Vonovia has been considering an acquisition of its competitor for several years and had already had two proposals rejected.

 2. US26 billion acquisition of Shaw Communication by Rogers Communication

The purchase of Shaw Communication by Rogers creates a national mobile communications powerhouse in Canada. The merged business has already pledged to build $2.5 billion in 5G infrastructure in Western Canada over the next half-decade.

1. US$30 billion acquisition of KCS by Canadian National Railway

Finally, we´ve reached the biggest M&A deal of the year. The combined firm would bring an integrated logistics firm that spans Canada, the United States, and Mexico, potentially perfectly timed for reset trade relations between the US and Mexico.

About ONEtoONE

If you are looking to optimize the value of your investment within an operation, I encourage you to evaluate ONEtoONE Corporate Finance: a firm dedicated to provide the highest value services to their clients through transparency and professionalism.

At ONEtoONE we have a broad knowledge of the Mergers and Acquisitions sector, as we have participated in more than 1000 mandates. Our company is specialized in international middle-market M&A advisory. We are continuously focusing on improving the techniques to achieve the best possible price for our clients, and we also advise on acquisitions, strategic planning and valuation. We are pleased to give our opinion about company valuation or other aspects of a possible corporate operation. If you need an advisor while buying or selling a company,
contact us.

biggest M&A deals of 2022 so far

Part IX: Decentralized Finance (DeFi) Part II

DeFi Service Projects and Use Cases

Most DeFi projects or protocols can be categorized into these main project types:

Decentralized Exchanges

Known as Dexes, are cryptocurrency exchanges that allow you to trade currencies without an intermediary. One example and one of the leading Dexes is Uniswap (an automated market maker protocol that runs on Etherum).

Lending Platforms

Decentralized finance allows anyone to borrow or lend cryptocurrencies. Users can earn interest yield when they loan their assets. They can also borrow cryptocurrencies by using their own funds as collateral. CoinLoan, Lending Block and AAVE are leading cryptocurrency lending protocols.

Savings

Like with a traditional savings account, you deposit the money you want to save in a bank and cannot withdraw it for a set amount of time, although at a very low interest. Crypto-saving works similarly, but the benefits overshadow those of a savings account in a traditional bank.

  • There are dApps like compound that allow participants to create a network of people to allow them to pool their money to earn interests. borrowers can take a loan from these pools. These borrowers are required to pay the collateral as security against the loan and are scheduled to pay interest back into the pool.
  • There are far fewer limitations on withdrawals
  • Because of the blockchain platforms provide more rigorous security for their assets.

Insurance

Cryptocurrencies are tied into smart contracts, which can be vulnerable to hacks and other security breaches. This is the reason why the insurance sector has now set foot into the DeFi space.

Insurance is meant to protect a customer from uncertain losses and provide a plan of risk management in case of a financial loss. Cryptocurrency insurance is similar to insurance for any other asset and protects against various risks attached to cryptocurrencies.

  • Technical risks: risks involved in the coding of smart contracts and development bugs.
  • Liquidity risks
  • Admin-key risks: Admin-key could be considered as the master key to all accounts on a particular platform; if it is stolen, everyone on the platform is at risk of being robbed.

Derivatives

In traditional finance, derivatives are defined as a commodity that derives its value from an underlying entity. These underlying entities can either be interest rates, stocks, commodities, indexes, or currencies (in the case of DeFi, cryptocurrencies). Derivatives are essentially contracts that are designed and signed by two or more parties, mainly for risk management purposes, agreeing to the purchase or sale of an asset at a decided price in the future.

Another reason that derivatives are used is to speculate the direction in which the prices of an underlying asset will move.

In decentralized derivatives exchange, the need for a broker is eliminated. Instead, these contracts and leverages are coded into smart contracts. Moreover, the transaction is completed on-chain when the decided terms of the contract are fulfilled.

DeFi derivatives include forwards, futures, swaps, and options.

BitMEX is one of the first platforms to introduce decentralized derivatives in 2014, and since Dapps like Binance and Huobi have followed suit.

Asset Management

DEFI protocols are the future of finance but unfortunately, unless you are deeply immersed in the space, many potential investors don’t have an idea of what protocols are worth following let alone what are worth investing in.

The process of buying into a DeFi asset requires climbing a steep learning curve. Having a wallet and having to fund a separate crypto account is foreign and intimidating to the average investor.

In the past year alone, we’ve seen several products offering different ways to either track, manage or hedge exposure through a suite of various DeFi projects in the lending, DEX and derivatives sectors. The common theme is that of accessibility, ultimately making it easier (and safer) for DeFi users to keep track of their ecosystem interactions in a suite of intuitive dashboards and interfaces.

Some key characteristics:

  • Non-custodial – Ownership of the underlying assets is never revoked and tends to live in the wallet being used.
  • Composable – Many of the top Asset Management projects connect to a wide number of DeFi projects, creating an end-to-end DeFi experience.
  • Automated – The growing number of Asset Management tools are automated, meaning rebalances, collateralization, and liquidations can occur seamlessly without user interaction
  • Globally Accessible – Asset management tools are accessible to anyone regardless of their location or tax bracket.
  • Pseudo-anonymous – Asset Management products often connect through a wallet address, meaning that identity is optional to those who wish to share it.

Real assets:

Its is now starting to fly but over the past 2 years some of the DeFi assets also include private companies, real estate as well as hedge fund shares. Such types of assets generally feature additional growth and income mechanisms, subject to algorithmic allocations alongside the benefits of transparency in Ethereum. What would happen is that real asset projects would raise funds through an ICO. Like in an IPO scenario there would be a secondary market for these tokens.

Assets tokenization:

Help to enable organizations to dematerialize assets in the form of tokens that are legally compliant via a decentralized blockchain that are digitally accessible for investors.

Payment solutions:

Eliminating central authorities to offer a faster, efficient and more transparent payment systems to the unbanked population.

Bottom Line and DeFi Metrics

Understanding Blockchain, Crytpo and DeFi concepts allow us to understand that in the end, DeFi is about providing financial services from a decentralized platform (meaning no intermediation). To enter the DeFi market, whatever the project one would one to buy in, one should acquire a project token. That is, the currency in which the project transacts in (cryptocurrency). For example, Ether for Ethereum. A good way to analyse tokenized projects would be to know:

  1. Who is behind the project? One way to do so is to find out if there are any known VCs behind the project
  2. Know if it’s a reliable product trusted by many developers. The more applications that are built on that blockchain, the better.
  3. There are KPIs that are more market aligned like:

a- Total Value Locked (TVL): The most popular metric for DeFi is the TVL metric. TVL represents the total amount of assets locked in the various DeFi applications smart contracts. This metric is used to assess how much crypto is committed to a smart contract of a project. The total value locked in a protocol can be measured using crypto or USD. In a particular marketplace, TVL is the sum of total liquidity in the liquidity pool. TVL is often used in combination with the market cap, which is calculated by multiplying the value of tokens by their price in USD. As a rule of thumb, the lower the TVL, the more undervalued a DeFi project is. However, there’s more to consider besides the TVL when making a decision.

b. Token Supply on Exchanges: While DeFi aims to decentralize financial operations, it’s still essential for you to check the supply of tokens on centralized exchanges. If an abundance of tokens is held at the exchange, it points towards a significant sell-off in many cases. As a result of such a sell-off, the token tends to destabilize. Thus, it’s imperative to look for these signs while performing due diligence on your cryptocurrency. However, things don’t always turn out this way, and you also need to weigh token supply and other DeFi indicators when making a decision.

c. Token Balance Trends/Movement: The token supply doesn’t always indicate a large number of withdrawals from wallets. You also have to look at the balance movements of the token on the exchange. Keep in mind that it’s characteristic of crypto trading to move tokens from personal wallets to exchange accounts, and vice versa. Only a highly uncharacteristic or significant movement should tip you off when making decisions about DeFi tokens.

d. Inflation Rate: Most DeFi protocols have rules in place to ensure the token supply doesn’t cause inflation, leading to the devaluation of the DeFi tokens. However, this doesn’t apply to every token. While some projects don’t clearly explain the mechanism of maintaining a limited token supply, others don’t even have any coherent information on the subject. Therefore, when you’re selecting a protocol, look at whether a token is susceptible to inflation. If the answer is yes, it’s best to stay away.

e. The Growth of Unique Addresses: If a large number of unique addresses are holding a particular token, that could mean it’s growing in popularity and is being adopted massively. As an investor, you can use this as a metric to determine the relevance of an asset. However, it’s also important to note that a single user can create many addresses, keeping their funds in separate accounts. That could give the false impression of a token being widely used. So, be wary when using this metric. It’s best to use it along with other key performance indicators, as discussed in this article.

Key Players According to DeFi Pulse[2]

DeFi KPIs and Indexes

Defi and KPI indexesValur blocked DeFi

[2] https://defipulse.com/

Top Projects by TVL

Cryptocurrency - Decentralized finance

Top Lending Projects by TVL

Cryptocurrency - Decentralized Finance

Top Derivatives Projects by TVL

Cryptocurrency - Decentralized Finance

Top Cryptocurrencies as of November 9th 2021 18:00[3]

Cryptocurrency - Decentralized Finance

[3] https://www.blockchaincenter.net/

This article was written by José Ramírez Terc, specialist in 21st century business models.

Entendiendo los modelos de negocio del siglo XXI: Introducción

 

 

About ONEtoONE

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Fintech- the future of finance?

FinTech – the future of finance

What is FinTech?

The term “FinTech” or financial technology refers to new technology that aims to enhance and automate the delivery and usage of financial services. Fintech, at its most basic level, is used to assist organizations, company owners, and individuals manage their financial operations, procedures, and lifestyles more efficiently and to a higher degree. This is done via the use of specialized software and algorithms that run on computers and more recently on smartphones. Is FinTech the future of finance?

The term “FinTech” is a mix of “financial technology” and “financial innovation”.

FinTech has come a long way from when it was first introduced, nowadays it has taken more of a consumer-orientated direction. FinTech nowadays includes various sectors and industries such as retail banking, education, fundraising, and investment management as well as many more.

The world-famous crypto-currencies are also a development of FinTech. Although Bitcoin and the rest of these crypto-currencies may appear to be the stars of FinTech the “big” money is still in the traditional global banking business, which has a multi-trillion-dollar market valuation.

A new way of thinking about finance

FinTech has altered people’s perceptions of money and value exchange in a real-time, digital environment. “Cashless” companies are springing up all over, pushing reluctant customers to adopt the habit of digital transactions and leaving governments with the debate as to whether it is discriminatory or just progress.

You might be interested in: How is digitization changing the business world?

Expecting people to pay for products and services digitally rather than with cash is just a small change that society has had to make. There are far more extreme advancements such as Amazon´s electronic supermarket, “Amazon Fresh”. Here, customers simply take what they need, exit the store, and the products are debited to their Amazon account automatically. These types of ideas are likely to shape the future of retail.

You might be interested in: Enrique Quemada is named Advisor to the board of the Global FinTech Association

Another example of FinTech developments that many customers have accepted in current times is payment transfers via mobile phones or smartwatches. While PayPal has been around for a while, newcomers like Venmo, TransferWise, and Zelle are changing the way people exchange money for everyday transactions like splitting a bill and selling products to friends.

What happens next?

We have only scratched the surface of what is conceivable and expected by FinTech. It is drastically transforming our lives and habits by allowing us to trade, bank, and exchange money completely digitally. With big data, blockchain, AI, and other technological advancements now in use or on the horizon, company leaders should look for ways to incorporate FinTech applications into their own business models in order to gain tomorrow’s customers.