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Why is it important to have an M&A advisor in your company’s sale?

Have you bought, or sold, a business lately?  If you did, how do you know if you received optimal value on the deal? Did you ask an M&A advisor? It can take years before the value gained can be objectively measured, or even whether the result was a business success. Recent McKinsey and Harvard research shows that nearly 90% of all M&A deals fail to deliver the value expected or achieve their M&A goals.  How can this be? Several factors lead to poor M&A results.

In the next article, we will discuss the importance of having an M&A advisor in your company’s transactions. We will also discuss the most critical aspects of doing their job well from the advisor’s perspective.

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Pick the Right advisor in your company’s sale

Paul Hager, Partner at ONEtoONE Corporate Finance, speaks from experience. As someone who has bought companies as a member of the Fortune 500 investment committee and as a valuation and investment advisor to M&A clients, he has found that the team you select to be your investment advisor plays a significant role in the amount of value created in the deal. He has listed characteristics that exist in all exceptional advisors. You can find them below.

An exceptional advisor:

Asks “Why?”: The “5 Why” method states that clear insight leads to the best decision and that insight is likely to come after you’ve assessed answers to five iterations of “Why?”. An exceptional advisor asks “Why” to continuously validate assumptions, eliminate wasted effort, explore new deal options, and sustain deal focus.

Understands your business: The M&A advisor must have an empirical view of current and future industry trends, enabling technologies and interdependent industries that significantly increases the value ceiling.  As a result, they will develop an optimal set of investment candidates for each client.

Spearfishes: An exceptional investment advisor will find those investors and companies that most value a specific client’s offering. Using the “5 Whys” and other analytic methods (e.g., Porter’s 5 Forces) to build a well-defined target profile, the advisor will quickly identify ideal matches for each client.

Leverages global reach and local insight: A good advisor will leverage an expansive global investor network that connects multiple industries. An effective N&A advisor will leverage access to trusted M&A colleagues with a deep understanding of financial markets, industries, and companies in each region of the world. This allows them to open discussions with new investors and corporate networks that promise to hold a most significant interest in the deal.

Takes business, personally: A good investment advisor is continuously mindful that M&A success depends on people to embrace and support implementation – before and after the deal. Applying the previous four facets helps create and expand deal value.  An exceptional investment advisor knows that business is personal and that its most significant value asset must be supported, nurtured, and challenged. The only suggestion of Paul Hager is that you chose an investment advisor who also possesses the five qualities mentioned above.  If you do, you will capture exceptional value in your deal.

If you want to continue reading about the opinions and experiences of our partners, please click on the following photos and access their interviews:

Paul Hager
Dominique Gazel-Anthoine
Jean Luc Bertrand

Why many M&A advisors are not sufficient?

Being an M&A advisor is not an easy task. We have just talked about the characteristics that a good advisor must have to be hired for your company’s transactions. But it is normal for a business owner who thinks about selling his company to be afraid of hiring advisors.

It is a crucial decision, there is a lot on the line, and many things are going through his head: “Are they going to fight for my best interest? Do they have a large enough contact base to sell this? What if the charge me a lot of money, make us work, play around and then nothing happens?”.

It is true, a lot of “advisors” do not do practical work. They are good at documentation, valuations, analysis, etc. But they do not know how to locate the right buyer; they do not have the technical and human resources needed, so they cannot spend the necessary time to find the right buyer. That is why, regardless of their efforts and excellent skills, they fail to sell your company and let you down.

According to our Chairman of ONEtoONE Corporate Finance, Enrique Quemada: “Our experience in dealing with more than 1500 mandates has shown that 70% of the outcome of a business sale is based on an extraordinary amount of work on the buyer search and contacting of the key decision-makers. That is an intensive and heavy workload that cannot be done by a small team or a single advisor; the reality is that without a strong support system, they will not be able to do it”.

If this is your company and is the most critical transaction of its history, you deserve an elite team working to maximize the transaction sale value.

If you want to sell your company, make sure that the advisor you choose can provide you with this level of search capabilities to find your buyer and beware of the buyer who attacks your advisor.

If you sell a business, I warn you that buyers know that advisors play a very relevant role for the seller, and some will try to bypass them and speak directly to the company owner. We had the following experience: “Once the conditions for the contract and a deadline to sign the SPA had been set, the buyer asked to have a personal meeting along with our client. The buyer asked for a 30% payment deferral in the meeting, and our client agreed. The next time we met with him, he told us what had happened. When we asked him what guarantees they had given him for this payment, he did not answer. He had not gone into detail with the buyer, and he soon realized what a mistake he had made not having his advisors with him when making concessions”.

In some cases, a buyer tries to gain the client’s trust and encourages him to forget about his advisors, insisting that things will be smoother if they speak one-on-one. I recommend that you never fall into that trap. A trap set up without a doubt to negotiate with a less experienced person to get a better price.

How can the advisor help his client?

For an excellent professional dedicated to clients’ advice, such as a lawyer or a financial advisor, it is vitally essential to advise and guide him towards the best possible decision. When a business owner asks for advice on his company’s future, the advisor faces two types of clients: those who want to sell their business but do not know-how, and the ones who should sell their company but do not know it yet. What both business owners have in common are significant reasons to sell their businesses. These reasons tend to be:

  • The proximity of retirement.
  • It is unable to keep up with competitors.
  • Lack of sufficient resources to implement the latest developments in his sector.
  • Personal reasons such as health issues, being tired after years of hard work or the desire of spending more time with family and loved ones.

As a professional, the lawyer or a financial advisor’s responsibility is to recommend his client a great expert in M&A. Here is where in ONEtoONE, we want to help these consultants and give them the reasons we are the best companion for their client during his M&A process.

ONEtoONE: the best choice of advisor for your M&A transaction

At ONEtoONE, we are a firm specialized in M&A that supports our clients throughout the entire sales process. We offer a 100% specialized service to maximize its value and thus create interest and competition for it. We achieve this thanks to our international team of financial and sectorial experts. Our cutting-edge technology has allowed us to develop a proprietary methodology and developed our proprietary methods.

We guarantee the clients that we will always comply with our three pillars during the sales process: methodology, competence, and transparency. ONEtoONE applies its values and methods in all its services: sale and purchase of companies; mergers, business valuations, investor search, strategic financial advice, and financial advice.

If you are interested in any of our services, do not hesitate to Contact us.

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The 7 most common negotiation mistakes

Written by Thierry De Poerck , Partner of ONEtoONE Corporate Finance.

At ONEtoONE Corporate Finance we have a broad knowledge of the Mergers and Acquisitions sector, as we have participated in more than 1000 mandates. If we were to provide you with one and only one advice it would be:

Hire a professional and independent advisor to care of your deal while you focus on your business.

A seasoned M&A advisor will ensure you secure optimal value for your deal promptly by avoiding the 7 most common negotiation mistakes.

1. Believe in love at first sight and immediately enter into exclusive negotiations.

One should not be mistaken. There may be interest at first sight, but love has no place in business. The counterparty might make an eye-catching offer. This approach usually has 3 goals:

  • To fend off potential competitors that may have a different value proposition.
  • To capture your interest and lead you to to get down to business quickly.
  • To distract your attention from intangible issues.

In addition, the incentive to deal with you exclusively is frequently paired with a credible threat to walk away if you refuse to agree on an exclusivity period. Remember that if one party wants to move quickly, there are often benefits to taking things more slowly.

2. Fail to prepare before you negotiate thoroughly.

One often believes that if they have a strong opinion about what they want to get out of the deal, they are sufficiently prepared. Wise advisors do not rush into negotiations and take the necessary time to analyze multi-dimensional aspects and outcomes. Play the What if? game to eventually determine your best option to a no-deal situation (BATNA) and your walkaway point (your reservation value). Suppose you manage to assess the other party’s BATNA and reservation value. In that case, you have more rational elements at hand to make the right decision, reaching an agreement or walking away.

3. Confront rather than collaborate.

Some advisors like to consider themselves as conquerors and fear being taken advantage of or willing to push their luck as far as possible. They produce unreasonable requests combined with coercive techniques (no prisoner attitude). They focus too much on a deal closing rather than creating value from the deal, which may prove very painful later on in the process. A collaborative tactic is usually a much more effective way of negotiating. By building rapport and trust, both sides will feel more comfortable sharing their underlying interests in the negotiation. Smart advisors recognize they will more likely reach win-win solutions. Both parties create value instead of destroying it for themselves and the other party.

4. Consider a partial impasse as final.

More than enough parties find they have reached an impasse as they have disagreed on a critical issue. This could mean that valuable resources have been wasted and good opportunities missed. Logrolling might be an excellent technique to move out of the impasse by making beneficial trades across issues.  This requires you as a advisor to know your priorities and the preferences of the other side. Smart advisors may identify negotiation opportunities when others see no room for discussion.

5. Ignore the importance of cognitive shortcuts we fall back on.

Most people entering into a negotiation process are either ignorant of the cognitive shortcuts or tend to forget about them, particularly when they come unprepared to the table. What does it concretely mean? We tend to be overconfident of our odds of getting our way. We pay more attention to vivid information (the transaction price) than to less flashy information (the execution terms) that might eventually have a significant impact on the transaction value. We unconsciously create a mental short of denying an actual situation. One should be conscious of the pernicious effect of these biases on ourselves and the other side, especially when negotiating from a position of weakness: plan and prepare.

6. Deny ethical shortcuts.

One should also be aware that most people are willing to cheat now and then in negotiation when there is a financial incentive to do so and believe they will not be caught. They find many ways to rationalize their behaviour:

  • They somehow feel they deserve it.
  • They correct what is perceived as an unstable situation ethical shortcut.
  • They believe the other party will not feel the loss or simply deny having done anything wrong.

Beware that seemingly minor infraction of the moral code established between the two negotiating parties might be broken. The deal may be terminated, and the upset party might not let you off the hook.

7. Let our emotions have the upper hand.

We do not want mental shortcuts nor emotions to get the best of us and cripple our odds for a successful outcome. Emotions should not be eradicated because they may act as an efficient warning signal and provide us with valuable information about how the negotiation is going. But they should be controlled as they are prone to lead us to negotiation mistakes. Experienced advisors will beware of strong emotions; for instance, anger can lead to risky choices, sadness to overpay, temper to miss a good deal. When needed, they will break for everyone to cool down and ensure concerns are being aired before the negotiations resume. Professional advisors frequently act as minesweepers to avoid a good deal derail for a wrong reason.

If you want to learn more about it, feel free to listen to our new podcast:

About ONEtoONE

Our company, ONEtoONE Corporate Finance, 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.

Actions to successfully address a debt restructuring process

Written by Yolanda Plaza, Senior Manager of ONEtoONE Corporate Finance Spain

The economic crisis generated by COVID-19 has forced many companies to take advantage of extraordinary measures, both operational and financial, to ensure their viability.

Despite everything, we continue in an environment of high uncertainty and complexity. Companies continue to see their ability to generate profits and cash seriously diminished, with which they can meet their payment obligations. This situation will take many of them to consider the necessity to approach financial reconstruction processes, which allows them to adapt its capacity of return of debt, to the expectations of its businesses’ evolution.

It is fundamental to have complete, rigorous and updated information to carry out debt restructuring successfully. It is also essential to plan the strategy and count on expert professionals, knowledge of the market and enterprise mentality, that contribute credibility, confidence, and accompanying in this process. In many cases, that is critical to obtain the companies’ survival.

In general terms, the critical phases of a restructuring process are the following:

Source: own creation.

Present the situation analysis of the company and associated risks

First of all, we will have to analyze with a strategic approach to the company’s causes to this situation of distress. We will then detail how it has affected the economic crisis derived from the sanitary problem to our business model and our competitive position in the market. We will also document the operative and financial actions to align the company’s capacity of growth, with the one of debt refund.

This analysis will also help understand business risks and mitigation mechanisms to present them to financial institutions.

It is recommendable to elaborate an executive summary with general information of the company and the sector in which it operates that it includes among others: the shareholder and corporate composition, its geographic presence, the landmarks achieved, a brief explanation of the value proposition that the company offers to the market and its competitions critics, its organizational structure and finally a situation analysis of the present and potential market future scenes.

Preparation of the financial model

It will allow us to have a tool that quantifies risks, profitability, debt refund capacity, and scenarios that analyze the model’s hypotheses’ sensitivity, thus generating a fundamental document for the refinancing request to financial institutions. This model will include:

  1. Analysis of the historical financial information will help lay the foundations of the projections of the model, understanding the evolution of the profit and loss account and the balance in profitability and liquidity terms. The analysis will make it possible to determine how the free cash flow has evolved in each period, that is to say, the package generated by the company’s activity and assets. This is caused after meeting the needs for reinvestment in fixed assets and operating working capital, without considering financing. The analysis can also determine the debt cash flow, that is to say, the cash destined to the payment of debt principal and interest net of taxes, plus the contributions of new debt.
  1. Diagnosis of the present financial position: that it will include a detailed description of the composition of the debt by type of product, limit or matters granted, expiration date, current risk or amount ready to present date, breakdown of short-term and long-term debt, and contributed guarantees; all it classified by each one of the financial organizations that compose the pool of the company.
  2. To develop the projections of the profit and loss account, balance and future analyses of cash-flow considered based on the historical information and to the hypotheses raised by the company, which will include:
    • Sales volume: Make an estimate of the future business volume and actions to maintain the sales contribution margin, covering fixed costs and generating profits. These estimations are coherent with the evolution of the sector and the competitive position of the company.
    • Fixed costs: Define measures to adjust and minimize fixed costs of both production and structure, adapting them to the estimated capacity and removing as far as possible all those that are superfluous to the productive activity.
    • Working Capital Requirements – WCR: Optimize management, planning negotiations with suppliers and commercial creditors to achieve a longer payment term but without generating tensions that could cause breakages in supplies; the request for postponements in the payment of tax obligations if necessary, but always complying with the agreed commitments; propose the means to maintain complete control over the customer portfolio, to ensure timely payment and avoid high defaulting ratios; and finally, plan inventory management to avoid allocating more resources than necessary to maintain the investment in stocks. If we optimize WCR management as much as possible, the company’s cash flow tensions will be lower and, therefore, the company will also reduce its external financing needs.
    • Capital Expenditure – CAPEX: Analyze the investment needs to maintain the estimated productive capacity and determine if there are non-strategic fixed assets that the company can divest and generate additional cash flow.

According to the base case projections and the analysis of alternative scenarios, we can determine the expected operating free cash flows, which will guide the new financing structure.

Design of the restructuring strategy

It is part of the financial model, based on establishing a viable financing structure, that allows:

  • To redefine the current debt structure, in terms of due date, cost and guarantees, to adapt it to the generation of estimated free cash flows and the previously analyzed risk/profitability profile.
  • To evaluate the possibility of substituting part of the bank debt for non-bank debt.
  • To analyze the necessities of Equity: with entered potentials of new financial or industrial partners; or extensions of the shareholders’ capital, who allow fortifying the patrimonial situation of the company.

Negotiation and closing

Success in the negotiation and closing of the process depends mostly on developing a solid financial model. This model has to provide credibility to financial institutions and professionals experts in the area, who know the market and establish a competitive process between credit institutions and other investors, which allow achieving the established objective in the most advantageous conditions for the company.

The strategic importance is not due to ignoring that it has a relation with the different financial organizations.  It is not just a matter of locating the cheapest source of financing, but of creating a lasting relationship with the other financiers. Thus, the best conditions are available in a sustained way over time.

About ONEtoONE

At ONEtoONE, we have extensive experience as financial advisors and credibility as a structuring / appraiser / modeller in refinancing operations with financial institutions and equity investors. For more information, click the button below to contact us.

Stages of selling a company

As an owner, you may have considered selling your company, but you are unfamiliar with the procedure and are baffled by the technicalities involved. As specialists in the sale and purchase of companies, we help you understand the sale’s main stages.

The operation of buying and selling a company is a complex process that requires a team of advisors specialized in the company’s sector of activity. In general terms, the sale is structured in 6 stages: documentation, search, marketing, offers, agreements and closing. The following infographic will give you an idea of these six stages.

The transaction can take from 6 to 12 months. Its success depends mainly on selecting the best candidates, channelling the negotiations guaranteeing confidentiality and closing the most advantageous deal.

If you decide to count on ONEtoONE in this process, our advisors will work to obtain the highest profitability from the sale of your company and be by your side every step of the way.

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.

Lessons of 2020 for the rest of our lives

The year 2020 will be marked on our calendars as a year that changed everything. We have lived through one of the greatest revolutions that humanity remembers. Despite the bad news that has undoubtedly occurred, 2020 has come into our lives to essentially change the world we knew, from our work life to our personal life. It is a cliché to remember the traditional saying that in Chinese the word crisis is also used with the meaning opportunity, but if we look from a serene perspective, we will see all the lessons that this peculiar year has given us:

Above all, the most obvious has been the change at work. After years of hearing about the threat of robotization and digitalization of work, reality has pushed us to try out new work methods. Thanks to them, we have seen that we can be more efficient and able to increase the competitiveness of companies, improving, in turn, the lives of workers and their performance and cost savings for employers.

Employees have gained responsibility, and managers gained confidence in their teams. Rental and supply costs have been reduced. The use of digital platforms has simplified the organization of meetings and has favored connectivity between people and departments.

New and better work habits have emerged: more compact or flexible hours, but adapted to family situations, which has favored work-life balance. Teleworking from home has not only generated greater productivity, but has also had collateral benefits, such as the change to a homemade diet: healthier and cheaper.

Money has been saved, but above all, the most valuable resource: time. By eliminating long journeys, we have been able to take advantage of these moments in other activities, such as sports, whose practice has increased substantially.

These changes are going to stay, and it is challenging for companies to accept and implement them.

Entrepreneurs will have to adapt their means of production and their organization of work. Thus, it is crucial to plan the steps to follow, how each company will advance in this new world, and if it wants to face the profound transformation that will be essential. On a personal level, the pandemic has had a significant emotional impact, but it has helped us to see clearly what our priorities are: various studies show that 70% of Spaniards now value the family company more. We have learnt to see and value behind the people and so many essential but invisible professions: cleaning professionals, cashiers, health workers, teachers … Together with the care and appreciation of the elderly.

Many people have discovered the importance of enjoying the time we have or regaining freedom. Now is the time to set long-term personal goals. The solidarity experienced during these months has aroused interest in constructing a more just and harmonious society, since the creation of NGOs, foundations and collaborative organizations. We think more about others and the footprint we leave on our path. In addition, the drastic reduction in pollution has shown us that it is possible to advance in the fight against climate change, an essential fact for the survival of humanity and the economy. After so many lessons learnt with so many difficulties, rays of hope are finally looming on the horizon: different vaccines have been announced and vaccination schedules are beginning to anticipate previous and more pessimistic projections. Spain’s economic sector forecasts predict a recovery in the tourism sector that can contribute up to 10% of GDP. This, together with the 140,000 million in aid that we will receive from Europe (equivalent to 13% of current GDP), mark the path of a fast and much-needed recovery.

We have suffered, yes, but we recover.

Much faster than we expected. Perhaps the great lesson we have learnt is that the worst of all is the fear of fear itself. At ONEtoONE we have thought that this is the ideal year to recap, take notes and move on with all the recently obtained knowledge, but freed from unnecessary burdens.

That is why we have prepared a planner, not of days and weeks, but goals, objectives and purposes. To be able to reflect on all the lessons this year has given us and set goals that help us improve our lives. Because yes, we will always remember 2020, but if we learn its lessons and plan the future with them in mind, not everything will necessarily have been for the worse.

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lessons 2020

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 2020. What happened during this exceptional year?

Reflecting on the past year is highly important in order to learn from mistakes and identify best practices and improve continuously. While reflecting on 2020 we have to mention that his year was exceptional for the M&A sector as well. The coronavirus crisis has affected the merger and acquisition deals which caused an 11-year-low of $485.3bn in the second quarter. This decrease is understandable, as company owners were occupied by reacting to the crisis as it was the first priority during these hard times. Despite the difficulties of this year, several companies have executed successful deals of great value. We have brought you some of the most important deals of 2020.

The biggest M&A deals of 2020:

8. Marvell Technology to acquire Inphi for $10B

Marvell Technology announced that it will acquire Inphi in a deal worth $10 billion. The two US-based companies will combine to form a chip company worth around $40 billion. The aim of the deal is to build high-performance chips for data centers and 5G wireless infrastructure. “Our acquisition of Inphi will fuel Marvell’s leadership in the cloud and extend our 5G position over the next decade,” said Matt Murphy, president, and CEO of Marvell.

7. The $18.5bn merger of digital health groups Livongo and Teledo

These two digital health groups finalized their merger in October in a deal valued at $18.5bn. The merger was first announced in August and was completed in only 3 months. Both companies were founded with the same mission: to create a new kind of health experience, that empowers people to live their healthiest lives, according to Jason Gorevic, chief executive officer of Teladoc Health. From the merger, they are expecting to achieve the full promise of whole-person virtual care, supported by technology and analytics.

6. Seven & i’s $21bn purchase of Speedway

Seven & i Holdings, the Japanese owner of US convenience store chain 7-Eleven, struck a $21bn all-cash deal to acquire petrol station and convenience store chain owner Speedway, which was owned by the US’s biggest oil refiner Marathon Petroleum. This deal is the largest acquisition in Seven & i’s history. The deal means that Seven & i will add around 4,000 stores across the US and Canada, consolidating its position in the US convenience store market. The transaction was reportedly heavily contested, with Seven & i outbidding its competitors by $4bn.

5. Analog Devices’ $21bn acquisition of rival Maxim

Maxim Integrated develops innovative analog and mixed-signal products and technologies and Analog Devices is a leading global high-performance analog technology company. Analog Devices acquired its rival in a deal that is worth around $21bn in stock, which will create a company that has a value of $68bn. The two companies are expecting beneficial synergies as a result of the transaction.

4. Willis Towers Watson’s $30bn tie-ups with rival Aon

Despite the lockdown in March, there were still companies that managed to execute deals of large value. The two insurance giants, Willis Towers Watson and Aon have tied up in a transaction that they had been planning for over a year. The merger that will be completed in 2021 will create a global company worth $80bn. This deal has made the world’s second and third-largest insurance brokers into an industry leaders. The new global giant will challenge March & McLennan, an actual world leader insurance company by revenues. The two groups can enjoy several synergies by combining firms, but the goal of the transaction does not cost reduction but to be more capable of addressing client needs.

3. Petrochina’s $38.4bn oil and gas pipeline sale to PipeChina

Petrochina is a state-owned oil and gas company that sold a major part of its oil and gas pipelines in China’s Oil and Gas Pipeline network in July, for 268,7 billion yuan ($37.36 billion). This deal has marked the largest industry restructuring in the past 20 years with the aim of providing market access to infrastructure and boosting investment in oil and gas production. Due to this transaction, PipeChina will become an associate company of PetroChina, a listed arm of CNPC.

2. AMD to acquire Xilinx for $35bn

AMD, an American multinational semiconductor company announced it would acquire Xilinx, an American technology company in a $35 billion all-stock deal. The transaction is expected to contribute to the margins and free cash flow generation, delivering industry-leading growth. In addition, the combination of the two firms will create the industry’s high-performance computing leader.

1. Nvidia to acquire Arm for $40bn

The chipmaker Nvidia confirmed the planned acquisition of the British chip designer Arm from Softbank for $40 billion, and it is definitely one of the biggest M&A deals of 2020.  The transaction would transform Nvidia into one of the most important players in smartphone technology. However, the deal is likely to face regulatory scrutiny. Influential companies around the world such as Apple, Samsung Electronics, and Amazon.com are all Arm customers and would be affected by the transaction.

In conclusion, the M&A sector has reactivated after the first wave of the crisis. Even though the M&A deals of 2020 were worth less on average than the deals of 2019, when we could see deals worth more than $70 billion, we can be hopeful regarding the future. These successful deals and cooperation prove that a merger or acquisition can provide critical competitive advantages and synergies beneficial for both parties. These transactions can be lifesaving during such hard times as a crisis.

Sources: Penews, Computerworld, Reuters, Globenewswire

About ONEtoONE

If you are considering selling your company, ONEtoONE Corporate Finance can help you get the best deal possible. We are a global firm dedicated to providing the highest value services to our clients through transparency and professionalism.

ONEtoONE is specialized in international middle-market M&A advisory, having participated in more than 1500 mandates. We continuously focus on improving the techniques to achieve the best possible price for our clients. We advise on mergers and acquisitions, strategic planning, and valuation. If you need advice for any possible corporate operation, do not hesitate to contact us.

Investment opportunities – The “winning” sectors of the COVID-19 crisis

The COVID-19 crisis has caused several inconveniences for entrepreneurs, and it has affected many sectors negatively. The strategic decisions made during this time are crucial and will define the future of the companies. However, it is essential to highlight that there are also  investment opportunities that have arisen in many sectors as a result of the pandemic.

Is it the right time to sell the business and invest in other sectors, with even more potential?

Sectors with attractive investment opportunities:

Healthcare
The healthcare sector had an essential role during the pandemic. As people are desperately waiting for illness to be cured, investing in firms that are developing treatments for COVID-19 can be an attractive opportunity. Besides, due to social distancing, it is not recommended, or it can be even forbidden in some countries to visit doctors or hospitals in non-urgent cases. This change in regulations and habits have increased the importance of remote medicine, which might catch the attention of investors.

Technology
As a result of the increased number of remote workers, we can observe a growth in the markets of cloud services, telecommunications and other services that support the productive work from home. Also, the newest technologies or services like 5G have a great growth potential and can be attractive for investors during the crisis.

Due to the COVID-19 pandemic companies have to continue their production with the lowest number of employees possible to follow the rules of social distancing. Therefore, artificial intelligence and machine learning have become more needed than ever before. The companies are forced to innovate and use the newest technologies of automatization to avoid contacts between people, which makes this industry extremely attractive for investors.

Food
Since the pandemic started, the food consumption habits have changed, and companies that react to this change quickly can benefit a lot from it. More and more customers decide to stay at home and cook instead of eating out, which caused an increase in consumption at supermarkets. Not only at the beginning of the quarantine the shops were full of people who bought all the necessary food for long term, but later the customers still considered it more safe to buy from supermarkets than eating out. The closing of the restaurants in many countries supported this trend and even those people who used to go out to eat were forced to start preparing food at home and purchasing from supermarkets.

Those companies that can quickly react to the increased demand for food can benefit a lot from the pandemic. Customers are also more likely to order from supermarkets then before, therefore those supermarkets that have delivery options can be highly attractive for consumers. Therefore supermarkets are one of the clear winners of the crisis.

Also, the demand is increasing for healthy food which has a clear origin and transparent ingredients, and it has a vast growth potential regarding the future. Owing to this fact, the food sector has many attractive investment opportunities for entrepreneurs. The new trends such as veganism and vegetarianism has also gave space for new entrants to the food markets. The growing demand for meat suppliants is beneficial for not only bigger chains, but also for smaller companies which have started to sell these products. Read more about the Alternative Protein Sources market, which can be interesting for investors!

E-commerce
E-commerce is one of the most popular sectors to invest during the crisis. As the pandemic forced customers to leave their houses only in particular cases, even those people have started to order online, who had never done it before. Not only ordering food online but also buying clothes and electro domestics on the internet have become more common during the pandemic. This change in the behavior of customers is motivating the companies to start digitalizing, offer home-delivery services, and provide excellent customer service for their customers.

Fintech
Due to the increased number of orders online, the fintech companies are some of the winners of the pandemic. If you imagine the high number of online courses, streaming platforms, and other e-commerce platforms, you can understand why fintech companies are more important than ever before.

Cybersecurity
During the COVID-19 pandemic, many employees are forced to work remotely, which increased the importance of cybersecurity. Unfortunately, the number of cybercriminals, who want to take advantage of the situation, has grown as well. Consequently, the demand for cybersecurity services has gone up as it is becoming more and more essential for firms to keep their data safe. Owing to this fact, it can be an attractive investment opportunity for entrepreneurs.

Overall, the crisis had a negative effect on many business areas, but some sectors had to improve faster due to the pandemic attractive investment opportunities have arisen. Investing in businesses that operate the mentioned areas can be highly beneficial for entrepreneurs as the demand has increased suddenly for these products and services.

About ONEtoONE

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.

ONEtoONE services for investors

If you want to invest in a company with specific characteristics, our geographical and worldwide reach allows us to comb the market in search of the ideal businesses. Thanks to our search and analysis methodology, we find those opportunities with the best fit and most potential synergies and set them up to compete with each other. This competition strengthens our negotiating power.
Read more about our services for entrepreneurs who are planning to buy a company!

Selling a company in 2020 does not mean selling it for a reduced price

The COVID-19 crisis has affected most sectors, including the M&A. Several entrepreneurs are asking how the value of their company has changed because of the crisis. To answer this question, we have to separate those firms that have the financial capacity to survive this crisis and those who don’t. The buyers are also aware of the fact that the crisis has affected all companies and they know that there might be delays in production or difficulties to sell or receive payments. Therefore, the investors do not consider the happenings of 2020 as a base for the value of the business. Currently, the value is determined more subjectively than objectively to facilitate selling the company for a fair price.

Importance of valuation dates
First of all, the valuation date has become more important than ever before. As the crisis is has affected the market and the situation of many companies negatively, the value of most companies was not the same in 2019 December, as in 2020 March, and probably it will not be the same in 2021.

Therefore, when determining the value of the business, advisers consider the value before the crisis, and the possible value after the crisis. They treat 2020 as an exception because of the unusual circumstances, as the change in value was not the fault of the business owners, there is no need to punish them.

Price is not equal to value
It is also essential to highlight that the value and the worth of a company are not the same. The price is the exact value of the materialization of a company at the moment of the sale and depends on the offer and the demand as well. On the other hand, the value is the monetary measure of the degree of utility that the company reports to it.

Therefore, just because the current value of the company is much lower now than a year ago, does not mean that the price of sale is reduced as well. The important is to find several buyers making offers and competing for the firm, so the company can choose the best option, maximizing the value of the sale.

Risk and Profitability
Buyers make their finical decision about the company they want to buy based on the risk and the profitability of the firms. If two companies are facing the same risks, they will choose the one with higher profitability. Some of the risks that buyers have to face because of this extraordinary situation are the regulatory changes or the loss of significant contracts. Nevertheless, these risks will disappear during the year of 2021.

It is also important to mention the risks associated with the cash-flows. We cannot talk about “risk-free” rate anymore, and the unsystematic risk has to include the extra risks because of the COVID-19. Besides, advisers have to rely on the middle and long projections, which might become true, or might not. The recovery of the sector from the crisis should be considered during the valuation, as it may vary by business areas. Also, it is recommended to calculate with the possible change in consumer habits because of the crisis, as it can affect the future profitability of the companies too.

The advisors should make analysis of the expectations of the future situation of the economy and the sector, using the most information at the moment of the valuation, with a goal of providing realistic image of the company. If you want to know how risk affects investment terms, read about it in our article.

Personal Reasons for selling a company
Last but not least, the personal reasons can affect the valuation process during the COVID-19 crisis as well. The decision of selling a company evokes emotions in every entrepreneur. If the sale is forced by the external environment, which can be the crisis, an illness or other reasons, it can be even more difficult to finally decide to sell the firm. The business valuation always depends on the personal reasons of the entrepreneur. The seller might want to fasten the process because of personal issues, but it can also occur that he has unrealistic expectations which make the procedure slower. The valuation is an instrument of negotiation, and the negotiation is a dance between the rational arguments, aiming for the best possible result.

To conclude, just because we are in a crisis now, it does not mean that it cannot be the perfect moment for selling your company. It is true, that the COVID-19 crisis has affected the business valuation and the sales process of businesses as well. However, as in every other area of life, we have to adapt to the new situation instead of letting it control us. The buyers and investors are also aware of the extraordinary situation and the M&A advisors continue searching for the best buyer for the firms and they do their best to determine the most appropriate price for both parties.

ONEtoONE Company Valuation Service
Having an accurate and comprehensive company valuation is very useful as it provides detailed information on the variables that underpin a business’s value. Company valuation is needed for buyers and sellers to during the sale process. For sellers, valuation is a negotiating tool that assists in the negotiation process. On the other hand, buyers should not accept the seller’s valuation, they should do their own. Our experienced advisors can help you to determine the value of your business, or the business you are planning to buy, to gain a competitive position in the market.

About ONEtoONE
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.

Economic reasons to sell a company

There are many different reasons for selling a business, and each owner has his or her senses. However, the reasons can group them into three main aspects: personal, family and financial. It is usually a combination of multiple reasons, both personal and financial. At ONEtoONE Corporate Finance, we want to help you with this challenging decision. Thus, we bring you the most common reasons for selling a company. In this article, we focus on the economic part; however, if you want to know more excuses, you can download our Ebook :

The company receives an offer:

On numerous occasions, a company directly receives an offer from the buyer. Most of the time, managers doubt if it is the best option. If this happens to you, you will need good analysts to advise you. 

Need for a new injection of resources:

On many occasions, companies need an increase in resources and goods. In the times we live in, everything changes very fast, and technology is increasingly advancing. For many businesses, this condition becomes unsustainable due to the need of constant investments. On these occasions, the business owners may conclude that it is better to sell the company than to continue investing in it and continue losing money.

 

Concentration in the sector:

When a sector tends to concentrate, it is an excellent opportunity to sell a company. In this circumstance, the business that is acquired is highly succulent for the buyer and, therefore, there is more negotiation margin and possibility of profit. We are currently experiencing a trend towards concentration in almost all sectors, especially those related to technology.

Decreasing profitability:

Sometimes a business can see its margins decrease over time. The company stagnates in a medium size in which it cannot benefit from the advantages of large companies, nor the flexibility of small ones. So, the owners may be interested in selling it to another one that can bring them more size, more profits and a reduction in costs that will increase the profitability.

Current crisis:

But if there is a situation that has put the world economy in check and has led to numerous sales, it is the current Coronavirus crisis. The pandemic has dramatically affected the business environment. That is why, as our president Enrique Quemada wrote, a large number of M&A operations are taking place daily worldwide. This situation leads to a high number of companies wanting to buy others, which means that is a great opportunity for you to sell.

Whatever your motive is, the sale of a company always ends in profit, in success.

What is the LOI and How to do it?

What is the LOI?

The‌ ‌letter‌ ‌of‌ ‌intent‌ ‌(LOI)‌ ‌is‌ ‌a‌ ‌paper ‌that‌ ‌is‌ key‌ ‌during‌ ‌the‌ M&A Process,‌ ‌it is formed by the main points of the first agreement made by the Buyer and the Seller. It will be the base of the Sale and Purchase Agreement (SPA)‌.

It‌ ‌is‌ significant ‌that‌ ‌all‌ ‌important‌ ‌aspects‌ ‌of‌ ‌the‌ ‌agreement‌ ‌are‌ ‌written‌ ‌down‌ ‌since thereafter, the Buyer ‌will‌ ‌invest‌ ‌in‌ ‌auditors‌ ‌and‌ ‌legal‌ ‌advisors.‌ In the case in which ‌the‌ ‌most important‌ ‌and‌ ‌relevant‌ ‌points‌ ‌were‌ ‌not‌ ‌addressed‌ ‌in‌ ‌the‌ ‌LOI,‌ ‌then‌ ‌it‌ ‌could be ‌possible‌ ‌that‌ the process‌ ‌can ‌fall‌ ‌apart‌ ‌and‌ ‌everyone‌ ‌involved‌ ‌wasted‌ ‌their‌ ‌time‌ ‌and,‌ ‌in‌ the purchaser case, a lot of money.

Furthermore, the‌ ‌LOI‌ ‌is‌ ‌what‌ the buyer will have to expose to the banks so that they can start financing what was agreed.

LOI Points:

  • Abstract: This is the introduction with the fundamental aims of the LOI.
  • Transactions: Simple description of the Transaction.
  • Timeframe for the transaction process: This point can include deadlines to keep process moving along, according to the arrangement.
  • Assumptions: It includes any representations made before the Closing of the Transaction which have been discussed between the Buyer and the Seller.
  • Conditions precedent: Detailed description of conditions for the closing.
  • Due Diligence: It is wise to describe in detail the areas of the company that will undergo the process.
  • Financing: In this part you should incorporate the type of financing that the Buyer will use to fund it.
  • Confidentiality: it is important to include a confidentiality clause due to the possibility that your document contains new sensitive information.
  • Exclusivity period: This point should be as detailed as possible.
  • Disclaimer of Liabilities: A brief pulled apart should be made to limit the liabilities of the Parties in the event that negotiations fall through after LOI.
  • Termination of LOI & Break up Fees.
  • Other conditions.

In collaboration with the Legal Department we have made two E-Books in which you can find the key points that should be included in the LOI (Letter Of Intent) and in the SPA (Sale and Purchase Agreement). If You want to know more, you can download our E-Book that provides detailed information about this document:

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. For more information click the button below.