Tag Archives: M&A negotiations

Transformational M&A is the priority within a new global business landscape

Written by the US team of ONEtoONE Corporate Finance


The M&A boom of 2019 has turned uncertain in 2020. But, there are islands of strong investment activity. M&A investments will be more centered on emerging technologies that enable corporate transformations or entry into new market formations. Strategic investment decisions will be made with an eye beyond growth in revenue, margin, or market share. The COVID-19 pandemic and economic recession have served to accelerate structural business changes that have been evolving across the global market. Supply chain resilience, distributed workforce optimization, skillset realignment, AI-infused business processes, and corporate end-to-end sustainability are a few of the areas where corporations are revamping operations and portfolio to meet the 21st century economy. Companies’ fundamental realignment of investment focus will likely remain through 2025.

Aggregate 2020 deal volume for the middle, large, and mega markets will be down 45% from 2019 levels. There will be nearly 70% fewer megadeals, but M&A within the North American middle-market sector will drop only about 30% from 2019’s highs. Other sectors of M&A activity through 2021 will be in distressed funding and accelerated industry roll-ups. Our takeaways for the 2020-2021 North American M&A market:

1) Heightened Demand for Disruptive Technology to take advantage of entirely new markets and to stay ahead of competitive market entrants.

2)Transformational change needed for entire portfolios in order to increase market penetration in fast-growing sectors, such as BioTech, medical/health services, IT infrastructure, sustainability, ClimateTech, natural resources, Telecommunications, FinTech, and core technology disruptors (AI, IoT, Cloud, Blockchain).

3) Cross-border M&A remains strong, aided by new foreign direct investment legislation in key markets, such as in UAE and China, will give impetus to North America looking outside of its borders for transformative assets. At the same time, North America will remain attractive investment geography because of its advanced technology and healthy consumer markets.

4) PEs and VCs turn from small deals to branded companies, while corporations look for value deals, market consolidation, and recapitalization. It is expected these activities will stay near the rubric of portfolio or capability transformation.

5) Buyers will heavily weigh Environmental and Social Sustainability (ESG) and corporate data security integrity, particularly as it relates to GDPR compliance. A company’s ESG and data privacy capabilities will be major determinants of its value and fit for future business platforms or add-ons.

6) Historical levels of cash available for M&A, with PE firms holding $2.4 trillion, US corporations’ access to $2.2 trillion, and non-financial institutions/groups raising $6 trillion in debt & equity. Even if the economy continues its GDP losses, these levels of capital are unlikely to tighten to the extent seen during the 2007-2009 Great Recession.

If you are looking to optimize the value of your investment within an operation, we 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.

Confidentiality and the Virtual Data Room

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.

Data Room: If the deal has gone up to the point that there is the need to create a Data Room it means that we are near to the closing of an operation. In other words we are in a sensible point in which confidentiality is vital. That’s why Data Rooms are designed to protect information since they create a virtual space in which the seller will deliver all the documentation necessary to the potential buyer to proceed with the operation.

Defining the Virtual Data Room

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.

Mergers & Acquisitions, Compraventa de empresas

70% of the value of a company lies in finding the suitable buyer

Many business owners will sell to the first buyer without taking into account other potential buyers. When selling your business it is important to ask questions specific questions. Is this the best buyer? Is he the one that can pay the most for the business?
Business owners often rely on a lawyer or an auditor to look for potential buyers and investors without considering 70% of the deal value lies in finding the suitable buyer. Hence, it is essential to find a buyer which is the best strategic fit and will pay the most.
To maximize the value of your company, you or the advisors must engage in a rigorous search process to find buyers or investors who can deliver the highest synergies for your business and those with the strongest financial profile.
The best buyer is not always the most obvious buyer or the closest one. The best counterparty for your company could be for example from a different sector located on the other side of the world.
Once, in ONEtoONE Corporate Finance we advised during the sale of a company that generated ten million euros each year, the company had two million euros in operating income (EBITDA) and six million in financial debt. We found a buyer in the same country (Spain) who´s company earned double of what this other company earned, but had accumulated a lot of debt. He was interested in buying the company, offering to buy it for six times the operative income, which meant that discounting the company´s debt; the potential buyer was willing to pay six million euros for the selling company. As the potential buyer did not have enough capital up front to pay for the company, he offered to pay two million at the time of the sale and the rest of the four million over the upcoming years.

We found a German buyer with a turnover of double the selling´s company, but contrary to the Spanish buyer, he did have financial capability. Given that it was an international operation and the German company did not have a presence in Spain, he offered to pay a higher price for the company. He offered to pay seven times the operating income, (that after subtracting debt, it valued the company at eight million euros) and also planned to pay for the company in deferred payments, paying six million at the start and the rest of the two million one each year.

We attracted a third buyer, a Canadian company with a turnover of more than a billion euros, from which he earned a total of hundred million and with no debt. He saw many synergies with our client and he did not have any presence in Europe. He had a lot of interest in the company and offered to pay ten times the operating income of the company that after subtracting the debt, it left the buying price set at fourteen million.

If we were to have sold it to the Spanish firm, the firm could have come up with excuses not to repay the remaining four million euros and could have paid for the company two million. The Canadian company paid seven times more.

For your company, you should look for a buyer that gives you synergies and has a lot of cash at hand, without minding so much about its location. If the buyer can perceive the true added value for the company, they will be willing to pay more for your business.

Cómo encontrar al mejor comprador_EN_ DEFINITIVA

Written by Enrique Quemada, president of ONEtoONE Corporate Finance.