Why protein substitutes became popular lately? Global consumers, nowadays, have an unprecedented concern about human health and environmental sustainability. This change in eating habits led to the emergence of movements like vegetarianism, veganism, and flexitarianism. Therefore, alternative source proteins became more appealing for customers, and also to entrepreneurs as it is an attractive market.
Excluding meat and dairy from the meal plan not only contributes to animal welfare. It also has several advantages for the health and environment. According to researchers, the consumption of red meat can be linked to digestive issues and heart illness. Due to these facts, the number of consumers eating plant-based is steadily growing. There are several companies already reacting to the change in the demand, offering different types of alternative proteins to the consumers, such as Nestlé and Sensient Natural Ingredients. Nevertheless, there are still countless attractive business opportunities for entrepreneurs in the expanding market.
How to substitute protein?
Meat: Using seitan (wheat gluten), mushrooms, rice, or soy-based products, such as tofu or tempeh, are popular meat substitutes. These products can replicate the taste, and also the texture of the meat.
Dairy: To substitute dairy, consumers can choose from a wide range of drinks made of rice, soya, almond, or coconut oil. Changing to these products facilitate leaving the milk-based product out from the diet permanently.
Eggs: Eliminating eggs from daily life does not mean stopping to bake. To replace eggs, it is possible to use tofu, tapioca starch, or fruits like mashed banana or applesauce.
Importance of plant-based alternatives
The segment of plant-based alternatives is expected to grow significantly in Europe and North America as well, which means an attractive opportunity for companies. Chilled meat substitute will remain the largest segment in value from the meat substitute categories, especially the subsegment of soy-based ready meals is going to expand.
The average prices of the segments slightly increased across the categories in the past, but it is forecasted to stabilize as the industry matures.
Key Drivers of Alternative Source Proteins
Several customers choose to reduce meat consumption in order to save money, as the price of red meat is growing. The prices of alternative source proteins are also in the upper range; however, it is expected to decrease as the industry matures. In addition, the prices of the substitutes are still lower than red meat, and it is one of the main reasons for excluding meat from the diet.
Food production accounts for approximately 26% of the global greenhouse gas emissions, and its primary sources are livestock, fisheries, crop production, land use, and supply chains. Therefore, by using low-carbon alternatives, customers can contribute to reducing emissions of food production, which makes alternative protein sources more attractive.
3. Growing population and urbanization
The continuously growing population presents challenges for sustainable development. As the world continues to urbanize, the successful management of urban growth is highly important for lower-middle income countries. These nations will have to provide proper nutrition for the growing population. Producing new types of feed, such as plant-based food, a protein, can be the solution for their concern.
4. Alternative food price per Kg in Europe
The prices of meat alternatives differ between countries, while it is the highest on average in Italy, prices are lower in England and Germany. The retail landscape and consumer habits drive the variance in price mainly. Therefore, customers pay less in countries where the behavior is price-driven.
Who are the key players, and which were the best deals of this attractive market? If you want to know the answers to these questions and more, download our report.
Confidentiality during an M&A process is vital for the success of an operation. One of the Corporate Finance Industry success metric is the levels of transparency between buyers and sellers, making confidentiality a crucial in any operation. A good M&A advisor also supports the transparency and confidentiality of the process.
Confidentiality and transparency have their protagonism during many phases of the process; in this article, we will refer specifically to the Virtual Data Room.
Managing confidentiality during an M&A Operation:
Managing confidentiality during this process is a crucial aspect within an operation. Usually the sellers seeks for higher levels of confidentiality but this metric may vary depending on many factors.
For example, if the seller wants a high level of confidentiality he must reduce the amount of potential buyers he reaches, but this will slow down the selling process. Vise versa, if the seller seeks faster results he must amplify his selection of possible buyers, making it more difficult to control the confidentiality factor.
This may seem like a conflicting paradox for any seller because many business owners do not posses knowledge of the different techniques that can be applied to increase confidentiality during the M&A process.
What are some techniques we can refer to regarding confidentiality during an operation?
Creating a blind teaser: This document is designed to protect the identity of the company being sold when presented to potential investors. The teaser uncovers the situation of the company but not its name. If buyers show interest a confidentiality agreement is signed to protect such identity.
Signing an NDA: Confidentiality is crucial since day one. There will be a lot of agents involved in the process everyone that is exposed to this information must sign an NDA so the idea and intention is protected and safe.
Confidentiality Agreement: This document serves two purposes. The first one is to protect the selling company’s intentions regarding potential investors once they showed interest. The second one is that the signing of this document represent a clear intention of the buyer to proceed with a possible deal.
A virtual data room (VDR) is a virtual space where the seller uploads all the necessary documentation of the company so the buyer can have access to it and advance in the process. This transaction of information is extremely delicate and must be made only when there is a trust-worthy and robust relationship between both parties, meaning that there is already the will to invest and close a deal.
The transaction of this information is made through unique online software design to prevent any disclosure of the documentation and keep-safe all the uploaded data. The software must be a high-quality product that provides confidence, security, and safety to both parties involved in the operation.
Imagine how hard it can be for a business owner to expose the essence of their company to someone. Leaving aside the emotional factors that make this operation hard, this part of the process must have all the requirements to ensure safety within the parties.
In every scenario, work-ethic and professionalism must be applied, but when referring to VDR’s we can assure that one of the best options in the market is EthosData. We invite you to take a look at their high-end Service that guarantees safety when taking care of your documentation.
In ONEtoONE we are characterized by the level of transparency, confidentiality, and professionalism with which we handle our clients’ operations. One of our best allies is the trust we generate through our work. Therefore, we encourage you to contact us if you are looking for advisory on buying or selling your company.
Pick the Right M&A advisor By PAUL HAGER, Partner of ONEtoONE Corporate Finance
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?
Well-known, high-profile deals like Daimler-Benz-Chrysler; Time Warner-AOL; Quaker Oats-Snapple; Sears-Kmart; Google-Motorola; Sprint-Nextel, are extreme examples of deals not meeting expectations. A number of factors lead to poor M&A results. These include: simply paying too much; fundamental cultural mismatch; massive infrastructure incompatibilities; significant redundancies; or no product synergy, whatsoever (i.e., the marriage simply wasn’t ever going to generate products customers would consider more valuable).
As someone who has bought companies as a Fortune 500 investment committee member, and as a valuation and investment advisor for M&A clients, I’ve found the team you select to be your investment advisor plays a significant role in the amount of value created in the deal. I hope my thoughts might help you pick the right investment advisor, and significantly increase the likelihood of you achieving your M&A goals. I’ve listed characteristics I think exist in all exceptional advisors. An exceptional investment advisor:
1) Asks “Why?”.
You’ve likely heard of Simon Sinek’s Golden Circle paradigm or Paul Ambruso’s use of the “5 Whys” to discern the root cause of success and failure. The “5 Why” approach was derived from Taiichi Ohno’s 1960s Toyota Production System methodology. Its purpose is to identify inefficiencies, waste, inconsistencies in manufacturing. Most importantly, the technique can help people discover and objectively assess assumptions, biases, facts, priorities of any endeavor – personal or professional. In our case, buying or selling a business. The “5 Why” method states that clear insight leads to the best decision, and that insight is likely to come only after you’ve assessed answers to five iterations of “Why?”. For example, your investment advisor might ask, “Why do you want to buy a business?, Why do you think buying another company will lead to greater innovation?, Why do you think this type of research capability will lead to needed innovation? And, so on. Asking “Why” throughout the M&A process leads to clearer understanding of why a certain type of company or investors would be the best match. An exceptional advisor asks “Why” to constantly validate assumptions, eliminate wasted effort, explore new deal options, and sustain deal focus.
2) Understands your business
As an M&A advisor, there is no adequate substitute for deep understanding of a client’s operations and industry sector. Having empirical insight into current and future industry trends, enabling technologies, and inter-dependent industries dramatically heightens the value ceiling. An exceptional investment advisor will use this insight, and that of her other industry experts, to develop a set of optimal investment candidates for each client.
Last year, a friend of mine told me of her exciting trip to Bora Bora (How nice is that?) She said the restaurant would take their dinner order the day before, so that snorkelers could search for the exact type and number of fish needed for their guests’ dinners. No waste in effort, time, or resources (fish not on the menu appreciated that). The diver knew the depth and location to find the type and size of desired fish. An exceptional investment advisor will find those investors and companies that most value a specific client’s offering. Through use of 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 superior matches for each client.
4) Leverages global reach and local insight
In searching for their client’s best investment candidates, it is sometimes more efficient and expeditious for advisors to contact corporate, institutional, and private investors with whom they regularly do business – “the usual suspects.” Because of established trust and understanding regarding these investors’ preferences and capabilities, advisors will work within their established networks. That’s understandable. But, the best strategic partner, the one that may most value the client’s offering is often not within any investor’s direct set of contacts. The best advisor is one who will leverage an expansive global investor network that connects multiple industries. Investors who most value your offering may be in Singapore, Prague, Estonia, or Shanghai. An exceptional investment advisor will leverage access to trusted M&A colleagues with deep understanding of financial markets, industries, and companies in each region of the world – allowing them to open discussions with new investors and corporate networks that promise to hold greatest interest in the deal.
5) Takes business, personally
If the human body is 60% water, I surmise at least 60% of a company’s value is its people. Or maybe, applying the Pareto Principal, 80% of a corporation’s value is its people. A good investment advisor is constantly mindful that M&A success depends on people to embrace and support implementation – before and after the deal. Having been an entrepreneur, and having worked to grow small businesses for nearly twenty years, finding a phenomenal, successful M&A match helps to improve the lives of people in each company. Or, it should. Cultural rifts and redundancy layoffs can destroy the deal, its value, and peoples’ lives. Applying the previous four facets helps create and expand deal value. An exceptional investment advisor knows that business is personal, and that the company’s greatest value asset must be supported, nurtured, and challenged. A successful M&A deal will do that.
There are many exemplary investment banks and advisory groups around the world. Whether it be a top-tier large firm, or one with a boutique focus, these firms have phenomenal analytic research, and deal-making talent. I know this from my own experience.
My only suggestion is that you chose an investment advisor who also possesses the five qualities mentioned above. If you do, I am confident you’ll capture exceptional value in your deal.
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 provided the highest value services to their clients through transparency and professionalism. For more information click the button below.
The ONEtoONE team in Mexico has prepared a report on the automotive industry in which they explain the main characteristics of the sector, which is currently an exciting industry for M&A operations.
The automotive sector is one of many that are being transformed by the technological revolution, just like the aeronautic industry. Due to it, the process by which cars have been manufactured is starting to incorporate new technological advancements.
This situation has started a race between companies in the sector trying to consolidate their position thanks to the incorporation of new technological capabilities. As a consequence, potential opportunities are appearing for M&A operations.
Automotive Industry Outlook
Technological developments and the focus on sustainable mobility have revolutionized the automotive sector towards electric energy and autonomous vehicle technology. This implies a change in most areas regarding the sector, such as vehicle manufacturing, auto parts, software, marketing, rental, and maintenance.
Some of the most relevant news regarding the automotive sector are the following:
JAC will export from México to Latin America -The Economist 14/10/2018.
The automotive industry was the sector that was ‘saved’ in NAFTA: Coparmex -Forbes 28/08/2018.
The cumulative sales of electric vehicles have reached 4 million- Bloomberg NEF 30/08/2018.
Download the full report “The automotive industry”
To find a complete and graphic view of the milestones of this trend and its global impact.
How much is an aeronautics company worth? Today, a lot. During this present year, we can see the aeronautic industry valuations reaching historical figures by looking into the numbers that corporate transactions show. This trend is expected to keep on going for the next few years in terms of M&A transactions within the sector.
According to our last report created by the ONEtoONE team, “The aeronautic industry in 2019”, the participation of certain countries plus a positive economic industry development, has made this sector attractive for M&A activity.
¿Which are the principal geopolitical players?
The aerospace industry in the USA is the principal character (Boeing), in what refers to innovation as well as the length of their product line, with a 47,7% of the global profit share.
Its participation has increased in the last years thanks to the growth in the civil industry activity and thanks to an increase of the market share for the European giant Airbus, which is now the main competitor for the United States.
Other big competitors:
It is possible to identify other big players –such as Japan, Canada, Brazil or Russia– who, slightly minor contribution, have presented themselves in leader positions in some areas of the industry.
Challenges and trends of the european aeronautic industry
A new competitor:
The entrance of a new competitor that breaks with the duopoly since 1997 between Airbus and Boing. During the last decade, China – which soon will turn to be the biggest aviation market in the world- has been developing its own airplanes through the public enterprise COMAC, searching to penetrate the occidental market.
Supply Chain Consolidation:
Boeing’s supply chain is focused in big suppliers, while the Airbus supply chain encounters itself in a more incipient consolidation phase.
Less dependency on Airbus:
Another challenge that companies of the industry must face is to depend less on Airbus. Because of this, a lot of companies find themselves in the process of complementing their activity by participating in other areas such as the automotive, rail or nautical.
Corporate operations in the aeronautic industry in 2019
¿Which are the main objectives?
Search of leadership
Maintain leadership by increasing the presence in the European market by the creation of big multinationals (TIER l). This trend has become really important, specially in Spain where the level of corporative consolidation is minor than in other countries such as France and Germany.
Take advantageas of I+D of the acquired companies
Less heavy structures and planes with lesser Co2 emissions allows companies to position themselves as important characters in an industry in which technological advances play an important role.
Access to higher volume contract
Access to higher volume contracts. Thanks to major technical and productive capacities, groups that are working in consolidation processes have access to participate in mayor business activities.
Strengthening of financial position
With the entrance of new funds, the company can grow organically in a faster way
Download the full report “The aeronautic industry in 2019”
To find a complete and graphic view of the milestones of this trend and its global impact.
The Autoparts industry activity is fundamental for economic value in the car making and aftermarket chain. Due to the excess of liquidity in the market, investors seek to increase their international presence. Currently this industry is very attractive, this is thanks to several reasons such as:
Increasing average age of the vehicles. In USA and Europe, the average age of vehicles is around 11 years, a trend that has been increasing.
Decreasing trend in the passenger car sales for EU and USA. This makes the automotive aftermarket stronger and might be caused by a change in consumer habits.
Regulations. Original Equipment Manufacturers (OEMs) cannot prevent their suppliers to distribute their products as spare parts to independent distributors.
E-commerce growth. Accessibility and a more widespread use of electronic platforms to make purchases of car parts.
M&A in the Autoparts Industry
During 2018 and 2019 the number of closed deals in the autoparts industry activity has decreased, however, it is expected to upsurge in niches during 2020. The deal count for this industry has behaved the same as the global M&A activity. But as expressed before, because of the already explained drivers, the deal count resistance is expected to shift into a growth pattern.
Even though the global automotive industry is entering a new cycle of decreased activity, we expect a resistance inside the automotive components niches that are engaged in innovative solutions. This includes autonomous driving systems, LED lighting solutions and electrical applications.
The Autoparts industry activity is always in a continuous transformation process. By 2030, it will be electrified, autonomous, shared, connected and yearly updated.
40% of the mileage driven in Europe could be covered by autonomous vehicles in 2030.
Mobility habits will change. By 2030, more than one in three kilometres driven could involve sharing concepts.
Due to rising population figures and mobility demands, vehicle age will continue to increase. It could rise by 23% by 2030 in Europe, 24% in the US and 183% in China.
By 2030 it is expected that Europe’s vehicle selling inventory will reduce from 280 million to 200 million vehicles.
This symbolizes a decrease of over 25%. For the US it would be of 22%, and 50% for China. However, vehicle age should be raising
Autonomous driving and electrification will have a mutual impact. By 2030, more than 55% of new cars will be fully electrified.
Redistribution of R&D Investment
Companies that invest 25% of their R&D Budget in software applications are rewarded with strong growth.
Between 2020 and 2025, manufacturers and suppliers will be battling against sinking margins while at the same time they will have to invest heavily in customer-orientated innovations.
New breed of auto components.
Does your business play an important role in the Autopart Industry?
The autoparts industry activity is expected to grow and change in the following years. If your business is inside this sector it might be the perfect time to consider selling your company. On the other hand, if you are interested in expanding your business, investing on the autopart industry could be the smartest choice. Either way, don’t hesitate to contact one of our specialized advisors to get more information.
Technology is advancing at high speed. Remember how space looked from the flight deck of Star Trek’s Enterprise, just before the ship reached warp speed? The speeding onrush of celestial bodies and the blurring of peripheral view might have made you feel the slightest sense of disorientation, anxiety, imbalance. The barrage of new technological innovations disrupting established industries can be equally disorienting, especially if you’re trying to lead a business. This is basically how the high-tech industry can also be described.
Today, innovation in key information technologies is fueling change across thousands of products and services. IT is restructuring business models of thousands of companies, driving a trend for a rising number of smaller individual startups and challenging the survival of more consolidated players in the field. Research shows that an increasing number of companies are buying innovative technologies to ensure a smooth adaptation to new processes, products, services, and markets that are created as a consequence of tech innovation. When outsourcing, for example hiring scarce technical expertise compliant with organic growth strategies becomes obsolete, acquiring other companies for that expertise may become a matter of survival.
Leading technologies like the Internet of Things (IoT), Artificial Intelligence (AI), and Blockchain are enabling innovation across a multitude of industries – especially in finance, transportation, agriculture, energy, supply chain, entertainment, healthcare, and bio-engineering. These three technologies eliminate barriers between traditional industry verticals. The result is hybrid companies that can efficiently produce, fulfill, scale, and support successful offerings across multiple verticals – a phenomenon called “Amazoning”. New advanced technologies will also continue to fuel related M&A activity.
When outsourcing, for example hiring scarce technical expertise compliant with organic growth strategies becomes obsolete, acquiring other companies for that expertise may become a matter of survival.
Let’s take a closer look at the mentioned technologies
The internet of things (IoT) – Billions of devices – from home thermostats, to heart pacemakers, to farm machinery, to police surveillance systems – are connected to the Internet and constantly communicating data. Businesses are taking advantage of IoT capabilities to scale for competitive advantage, and at a faster pace than they did cloud-based computing and storage.
The IoT ecosystem enables business intelligence (BI) efforts to apply machine learning on raw customer data pulled from devices and networks scattered around the world. Full use of IoT assets allows companies to measure and manage their global supply chains and operational performance instantly. For instance, retailers are able to real-time track individual product purchases – by customers, time of day, location, and dozens of other parameters.
Blockchain – The benefits of Blockchain technology will totally disrupt how we all live and work. Blockchain is a more specialized, function-specific, and structured application of the IoT schema. It is a highly distributed network of processing nodes (e.g., computers, databases, servers), where every node holds a mapping of the entire blockchain structure (addresses, node identifiers). As these nodes, or “ledgers”, complete a transaction for an “owner”, each transaction is time-stamped and encrypted. As these discrete transactions accumulate, they are grouped together, assigned an identifier, and labeled as a “block”. Strong encryption and multiple copies of each transaction block ensure no transaction record can be altered.
Blockchains have no central authority. They distribute work, according to pre-established order of work, across chain nodes for processing. All transactions are verified in the blockchain process and periodically revalidated to ensure there is no variance between nodes’ copies of each specific transaction. Many industries are taking advantage of blockchain’s processing, documentation, transparency, and securitization features.
Artificial Intelligence (AI) – In the 1950s, ‘60s, and ‘70s, AI was primarily an effort to apply sets of statistical models to discern data trends and perform non-complex problem-solving. Early AI was an attempt to replicate basic human reasoning as it applies to data mining and analysis. Today’s AI has advanced beyond data mining and machine learning – to “deep learning” where the computer can identify, recognize, analyze, and describe data patterns in human terms – to apply and enhance its own models and methods in order to more thoroughly understand data’s meaning. Advances in machine and deep learning now fuel other technologies, such as virtual reality, augmented reality, mixed reality, and natural language processing. In addition, it is very likely that AI will increasingly be used in a wide variety of M&A tasks.
Even as new information technologies are created (such as 5G, quantum, and neuromorphic computing), IoT, AI, and Blockchain will remain as major drivers of related M&A activity. In the attempt to have an overview of the M&A activity in this disruptive environment, we have used in our study a sample of over 5,000 companies and deals from Pitchbook.com advanced search for the high-tech industry for the period 2015-2018. Thus, this research of “disruptive information technology” includes IoT, IA & Machine Learning, Cryptocurrency/Blockchain, Cybersecurity, Fin Tech, Bigdata, Robotics & Drones and Cloud and 3D Printing.
Overall, the data show that there is a surge in the number of large value M&A deals from 2015-2018. VC firms are targeting larger tech players in the innovative information tech sector. The distribution of capital invested demonstrates that the predominant mid-market industry sector receiving investment was advanced IT, accounting for 70% of transactions throughout the period.
Even as new information technologies are created (such as 5G, quantum, and neuromorphic computing), IoT, AI, and Blockchain will remain as major drivers of related M&A activity.
Which industries receive the most capital investments for innovative IT?
Regarding the industries that receive the largest amount of capital investments for innovative IT, the data reveal a fragmented picture of technology application, with some predominant use groups being software (58.88% of all transactions), Other Financial Services applications (7.61%), Commercial services (5.64%) and IT services (4.02%) respectively.
A more thorough analysis can be found in the full report that can be downloaded at the end of this article. The High-Tech Industry Outlook 2019includes data of capital invested and deal count according to the volume of transactions, the primary country sector, the deal type, and world region.
To sum up, innovation across the IT industry is accelerating at dizzying speeds. Huge technology disruption – in the form of AI, IoT, and blockchain – is fueling other industries’ in-house innovation, and dramatically expanding companies’ capabilities across global markets. Companies are buying innovative IT to ensure their own ability to deliver new technologies, products, and services at accelerating speeds to quickly-evolving global markets. With regards to today’s M&A landscape, these disruptive technologies had the following impact:
US advanced tech M&A remains strong, but Europe IT M&A is growing
During a time of falling global Capital Investment activity, rising investment in the IT sector is a bright spot
Buyers are placing greater emphasis on integrating acquired IT innovation
Advanced IT remains the hot M&A target.
Download the full report “HIGH-TECH INDUSTRY OUTLOOK 2019” to have a deeper understanding of today´s M&A landscape within the disruptive environment.
The process of negotiating with investors implies many factors that have to be well managed to achieve the desired outcomes.There is no magic recipe for successful negotiations with potential investors, however and if you want to negotiate like an expert, the following key points will help you to get closer to your goals.
1. Understand what you really want and what your aspirations are when negotiating with investors
Goals give you direction but clear expectations will give you the strength to negotiate because you will have convinced yourself that you deserve it. As American president Lyndon Johnson said, “what convinces is conviction.”
2. Failure to prepare yourself equals preparing yourself for failure
Preparation is 99% of the success. Many negotiations fail due to the lack of preparation. It is essential that you discover during the process what the investment opportunity represents for the buyer: Why does he want to buy? Which ones are his restrictions? What are his economic motives? Why does he need your company? What does he intend to do with it? How much does he expect to gain?
Find out more about the search for investors here.
3. Reach an agreement with the ‘best’ alternative you have
A good agreement requires having good alternatives. If you lack alternatives you lack bargaining power which the buyer will exploit to obtain concessions from you. Although this seems obvious, often an entrepreneur negotiates with a single buyer: How do you know if this is the right buyer? Is this the buyer to whom your company creates the most value or the one who can pay the highest price? Only a good search method for alternatives will provide with answers to these questions.
4. A good negotiator asks a lot, speaks little and is a good listener
Share information, but above all, get information. Ask twice as many questions, seek clarification of the answers, and summarize what you have heard to verify that your understanding is correct.
5. A good negotiator builds trust, and never lies
Do not build expectations that cannot be fulfilled and keep your promises. You will gain the respect of the other party when being reliable. Lies eventually will be uncovered and undermine confidence, which increases the risk premium.
6. Create the optimal conditions for a good negotiation before meeting with the other party at the negotiating table
This is achieved by making sure the right people are in the room, with the correct expectations, at the most favorable moment for you, and that you have the best alternatives when there is no agreement. And of course, never improvise!
Prepare an overview of the various interests of all parties participating in the negotiations. Is there someone who can torpedo the operation because of other interests? How can you influence them to be supportive? Keep an eye on the people involved and their personal interests. Determine who on the other side values the operation most, and get that person to participate actively in the negotiations.
Alongside the interests of the investing entity there are the interests of the people who are negotiating. Find out who is the ultimate decision maker and what his/her personal interests, needs, and desired outcomes are. Ask yourself about the negotiator: Does (s)he have the authority to close a deal?
8. Have a sincere interest in the objectives of the other party
This will help that he in return also cares about your objectives, and creates the best mutually beneficial solution. Remember that by creating empathy you create a favourable climate for ‘grow the pie’ thinking. Be tough on your demands but affectionate with the person.
” Negotiating with investors is a game of information and information gives you power. You must seek to understand their needs rather than their wants.
9. Power is a very relative concept
In negotiations the power depends on your alternatives and the alternatives of the other party.
Remember that in a negotiation with investors 50% is emotion. Check the real power of the other party; usually it is being overestimated. Perceptions are crucial in negotiations, and it is essential to understand them well. Situational power is based on perceptions, not facts. Therefore, be aware of the signs you transmit.
10. A good negotiator is able to grow the pie rather than fight for the biggest piece
You will maximize your outcome when guaranteeing that both parties will achieve their objectives. The first step to grow the pie is to believe that a deal is possible.
Negotiating with investors is a game of information, therefore the best negotiators are focused on receiving information rather than giving information. When you better understand the needs of the other party, then you will find items that are very important to them but have less value for you. You can exchange these for items which are important to you but have less value for them.
And above all remember that in a negotiation that affects you, if you’re not at the negotiating table, you’re probably on the menu. If you are considering a corporate transaction and wish to prepare a good negotiation, do not hesitate to contact our advisors.
To meet the challenge of feeding a growing world in the face of strained food production resources, climate volatility and massive urbanization trends, it is necessary to link more capital with agriculture projects. One emerging financing trend that has the ability to significantly broaden the base of the agriculture sector investment pyramid is crowdfunding.
Through crowdfunding it is possible for agriculture project sponsors to directly reach large numbers of individual investors, broadening a project’s capital structure and experimenting with more creative investment terms and conditions.
While crowdfunding has great potential, agriculture companies as well as investors considering this financing option should not lose sight of the basic considerations that apply to other forms of investments, including what the relationship between the company and an investor will be, investment risk and return and the need to match capital investment and repayment cycles with the underlying business realities of a particular project.
The article provides a brief overview of crowdfunding, looks at the use of crowdfunding in the agriculture sector and considers the potential of agriculture sector crowdfunding in the future.
Overview of Crowdfunding
Crowdfunding is a technique for financing business, artistic or other projects and initiatives by pooling often small amounts of capital from a large number of people, in many cases through fundraising platforms that are set up on the Internet.
Crowdfunding can be structured in different ways and imply different obligations and rights for the promoters of projects, the platforms over which fund raising efforts are carried out and investors. The following are some commonly used crowdfunding structures:
● Equity. In an equity crowdfunding structure, in exchange for an investment, an investor receives an equity interest in the venture funded. The terms and conditions of the equity investment generally vary on a case-by-case basis.
● Debt. In a debt crowdfunding structure, capital from individual investors is pooled and then lent to a borrower. Key terms and conditions of the debt investment are based on the general lending parameters of the platform and the risk profile of the borrower.
● Coin. In a coin-based crowdfunding structure, the investor receives a coin or right to receive a coin based on the expectation that a market will be created for the coin in which it can be valued and traded.
● Reward. In a reward-based crowdfunding structure, the investor receives some type of reward for his investment. The nature and value of this reward can vary widely.
● Donation. In a donation-based crowdfunding structure, donations are made by the investor but the investor does not receive anything in return for his investment.
Crowdfunding has grown in importance as a financing tool. The largest crowdfunding platforms, such as Kickstarter and Indiegogo, have collectively raised billions of dollars in equity financing. It has been estimated that, as early as 2020, the crowdfunding market as a whole could reach US $90 billion.
As the crowdfunding market has grown and demonstrated its viability as a financing option, more and more types of businesses have sought crowdfunding options, including fashion, insurance and real estate.
Crowdfunding and Agriculture Projects
There are now several crowdfunding platforms in the market with an agriculture sector focus. Examples of these platforms include AgFunder, Cropital, the agriculture funding platform of Symbid and Harvest Returns.
Going forward, crowdfunding has the potential to play an important role in the agriculture sector for several reasons. The first reason is that agriculture projects can require a large amount of capital that can exceed the investment thresholds of smaller investors. Crowdfunding can give smaller investors the opportunity to participate in promising agriculture ventures of different sizes and in different parts of the world.
The second reason is that crowdfunded capital has the ability to fill the often large space between debt financing and equity investment. This space exists because the time it takes to arrange equity financing often significantly exceeds what food production cycles require, risk and return mismatches and disconnects that often occur between food production and profitability cycles and investor capital deployment and capital return timing expectations.
Limited access to equity capital, and particularly equity capital at the higher end of the risk spectrum, poses a major challenge to small and medium-sized agriculture companies who need higher risk capital so that they can create cultures of innovation and take healthy risks which can allow them to offer new agriculture solutions, create production efficiencies and significantly build firm value.
A third reason is that many consumers are increasingly concerned about where their food comes from, how it was grown and the food’s quality. Crowdfunding provides opportunities for individual investors and consumers to become more directly involved in earlier stages of the food production cycle. Further, the fact that by definition all food sector investors are also food consumers creates the possibility of paying investment returns not only through capital but also through food products that the farm has produced. This can help to convert producers and consumers from people who are on opposite sides of the food chain to partners.
Issues to Consider in Agriculture Projects
While crowdfunding poses great promise for the agriculture sector as a whole, agriculture companies that are considering crowdfunding as a financing option should keep in mind that, rather that constituting a silver bullet financing solution, crowdfunding for many firms will best be used as a complement to traditional debt and equity financing sources.
Further, while some types of crowdfunding do not require investment funds to be paid back, basic laws of investing economics suggest that no funding source will last for long if it is not based on a reasonably fair exchange of economic value. Accordingly companies should carefully structure capital raises so that they will lead to successful business ventures that ideally create a stage for long-term and mutually beneficial company-investor relationships.
From the investor’s perspective, the ability to invest directly in companies whose investment offerings have not been thoroughly vetted creates real investment risk. Agriculture is a sector with real risks and some companies, due to their teams, business models and commercial arrangements may be significantly better placed to manage these risks than others. Accordingly, investors must be on their guard to thoroughly analyze investment opportunities, and if necessary seek the assistance of third parties in doing so, so that investors clearly understand potential risks and returns.
Crowdfunding is set to become an increasingly important element of agriculture sector finance. This type of funding option has the potential to expand agriculture capital markets, allow agricultural firms to build value more efficiently and involve people more directly in food production. At the same time, companies as well as investors need to analyze crowdfunding options carefully to make sure they make economic sense, are carefully structured and ideally lead to mutually beneficial investment relationships.
The importance of conducting an effective integration process post-acquisition cannot be overstated. From ensuring that new company employees are comfortable within the workplace, to putting time into updating any internal company processes that need revising, the difference between a successful and failed merger can often be derived from the effort placed upon integration. The reality of the matter is that one of the greatest benefits of M&A is being able to incorporate your acquisition’s strengths into your own company’s processes, and in turn, you truly wouldn’t be doing your hard work justice if you failed to do so post transaction.
Practice What You Preach
One of the absolute fundamental facets of integration is training. In turn, it is crucial to approach this task with a great sense of practicality, and to not perceive it as a chore which simply requires a box to be ticked. Putting enough time into training any new employees, as well as older established employees, with all of the newly implemented processes and systems is essential to the future success of the merger. Resultantly, it is vital for the likes of top management and HR to implement a thoroughly thought out training process, which combines both group and individual tasks. In doing so, you are able to develop employees in a range of conditions and contexts, working with various issues from handling pressure situations to how to operate the company’s online portal. By applying such a comprehensive training program, it will go a long way in safeguarding the company’s continuity and progress in its newly merged and or expanded form.
Beyond the training phase, it is important that the principles, concepts and processes that have been taught are not neglected or forgotten about going forward. To ensure that all the time, money and effort placed upon the training does not go to waste, it is recommended that the company implements some solidified evaluation processes, whilst maintaining a high level of dialogue between HR, employees and top management regarding the new procedures. As a result, it becomes easier not only to track individual and department performances, but to also isolate the particular processes that are working well, which need improvement, and which need to be scrapped altogether. The fact is that not everything you try will work, and in turn, discovering that a certain practice doesn’t actually work for your company should be perceived as a positive thing. As such, you are now one step closer to ascertaining what is the right combination of processes and practices for your firm; categorically, understanding what doesn’t work for you can be just as valuable as understanding what does.
In saying this, these things do take time and as has been alluded to previously in our article regarding the human aspect of M&A, it is important to maintain a decent level of patience. Without taking an absolute laissez-faire approach, it is important to remember that Rome wasn’t built in a day, just as your company post an acquisition won’t reach its ultimate heights instantaneously. It takes time for working relationships and processes to be developed and understood, for strategies to come to fruition and ultimately, for the newly merged company to reach its potential. With this in mind, it is important to not place too higher expectations on your company within the short term, after your acquisition. There is no problem with being bold and ambitious, but it is more about playing the long-game, in which you are not too discouraged if results don’t go exactly your way in the initial stages of the post-acquisition period.
Arguably the most important factor throughout this entire process is the upholding of a clear vision, which the entire firm has agreed upon and bought into. So long as your company has its sights set on a certain outcome, a collection of goals, or even a mentality that is able to unite the firm, then the company will solider on as a team; a collective that is determined to achieve success together. After all, it makes it so much easier for individuals and teams alike to achieve success when they know exactly what that success may look or feel like. Resultantly, a newly merged company’s vision for success and where it wants to be in the future should be the very foundation for what binds together each individual inside the firm. For nothing truly brings people together than a shared desire to achieve something big. Thus, from the moment a company signs off on an acquisition, their mind’s must turn to the all-important notion of integration. In fact, it has been suggested that “ideally, the acquiring company should begin planning the integration process even before the deal is announced.” In doing so, it becomes clear to top management as to how they can best go about implementing their new vision into the firm’s ethos as fast as possible.
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