Tag Archives: mergers & aquisitions

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.

The best M&A advisor

Whether Buying or Selling a Company: Pick the Right Advisor

Written by Paul Hager, Partner of ONEtoONE Corporate Finance United States

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).

How to choose the best M&A advisor

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. Below, I’ve listed characteristics I think exist in all exceptional advisors.

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 and inconsistencies in manufacturing.

Most importantly, the technique can help people discover and objectively assess assumptions, biases, facts, priorities of any endeavor. Whether this be personal or professional. In our case, it applies to buying or selling a business. The “5 Why” method states that clear insight leads to the best decision. 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?

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. Additionally, 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. Furthermore, 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 further develop a set of optimal investment candidates for each client.

3. Spearfishes

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. By using the “5 Whys” and other analytic methods (e.g., Porter’s 5 Forces) to build a well-defined target profile, the advisor quickly identifies superior matches for each client.

4. Leverages global reach and local insight

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”. Due to 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. They will also leverage access to trusted M&A colleagues with 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 greatest interest in the deal.

5. Takes business, personally

I surmise at least 60% of a company’s value is its people. Alternatively, if 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. As well as the fact that this is important both before and after the deal.

Having been an entrepreneur, and having also worked to grow small businesses for nearly twenty years, finding a successful M&A match helps to improve the lives of people in each company. Cultural rifts and redundancy layoffs can destroy the deal, its value, and peoples’ lives.

What are the benefits of following these steps?

Applying the previous four facets helps create and expand deal value. The best M&A advisor knows that business is personal. Furthermore, they know 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.

My only suggestion is that you chose an investment advisor who also possesses the five qualities mentioned above. In doing so, I am confident you’ll capture exceptional value in your deal.

If you are looking to optimize the value of your investment, I encourage you to evaluate ONEtoONE Corporate Finance. The firm is dedicated to providing the highest value services to their clients through transparency and professionalism. For more information click the button below.

About the author

Paul Hager

Paul Hager specializes in business innovation, growth strategies, and corporate finance., with over 30 years’ experience helping mid-market and Global 1000 companies grow corporate value through innovative business models, products, and operations. Paul has led and participated in corporate valuation; operational and organizational restructuring; Merger & Acquisition due diligence; value optimization; and closing M&A transactions. He joined ONEtoONE as a Partner in 2017, with principle focus on advanced digital and energy technologies.

About ONEtoONE

ONEtoONE is an international M&A firm with offices in 38 cities across the globe. Our goal is to optimize your work and increase the number and quality of your M&A transactions. We focus on working as a team to leverage each other’s strengths daily. We are experts in our field and can guarantee you a wide range of high-quality clients through our global network of boutiques.

Join us today to become a member of a global, dynamic team.

Relationships in M&A: The Differentiating Factor

Company Relationships in M&A: The Differentiating Factor

If you consider just how much time goes into an M&A transaction, from extensive financial analysis to the intricate process of evaluating the target’s corporate culture, then you can imagine how disappointing it would be for a venture to fail due to poor company relationships. As it were, it is estimated that somewhere between 70% to 90% of M&A transactions fail to achieve all of their goals; it is fair to suggest that much of this would come down to poor relationships in M&A.

On face value, the concept of individual relationships within a company can seem rather trivial, but the reality is quite the opposite. Just like any functional group, success will largely be derived from how well the team is able to work together, and naturally, this will significantly depend on relationships within this group. In turn, the concept of fostering relationships must be taken extremely seriously within any business, and this is never more relevant in the context of a newly merged company post-acquisition.

The Importance of Company Relationships

With this in mind, a company must consciously and actively prioritise the promotion of positive relationships internally, to the extent that it can be considered a part of the company’s corporate culture. As we have alluded to in our previous article, the advantage of having a strong and balanced corporate culture cannot be overstated, and resultantly, the companies that dedicate the most time to developing it will often rise above those that fail to do so.

As such, the task of fostering company relationships is not just a job for top management and human resources, rather it is for each and every employee to truly embrace. Alas naturally, we as human beings will not always enjoy the company of absolutely everyone, but it is essential in a business context to put any differences with particular individuals aside for the sake of the firm’s success. As it were, a solid foundation of strong working relationships internally will exact a high degree of confidence within a team to deliver fruitful results, in a genuinely supporting environment.

How to Ensure That an Acquisition Is Successful

This latter point in particular, the maintaining of a supportive workplace, is absolutely essential for company morale. As a direct result of being apart of such an environment, incoming employees post an acquisition will be able to transition into the team much more comfortably in the knowledge that their colleagues will have their back from the very first moment. One of the crucial aspects of ensuring this is the case is creating a workplace that promotes open dialogue amongst its workers, in which employees can feel comfortable in discussing their feelings, ideas and perspectives regarding business operations.

One of the major benefits of an acquisition is exactly the fact that you will obtain individuals with varying opinions, and so to supress anyone with a difference of perspective is to truly waste an opportunity to improve the company. As a whole, this notion derives from the concept of trust. The sooner a company can generate a genuine level of trust amongst its employees, the sooner it will truly be able to promote the comparative advantages of individuals within the firm so to increase input overall.

Be Careful: Do Not Neglect Internal Company Relations

What is vital to consider that in this disruptive moment in time for the world of business, arguably the most differentiating factors of a firm are related to innately human-oriented skills and capacities. Be it personalised customer service, corporate communication or negotiation skills, these are all linked to interpersonal and emotional capacities, and it is unsurprising to see that the companies who most effectively maintain strong internal relations are the ones that will most effectively execute these differentiating external operations.

The other thing to recognize is that neglecting internal relationships can be as damaging and harmful to a company, as maintaining well-established internal relationships is beneficial. Resultantly, to set this in a sporting analogy, if your company fails to address internal relations whilst your competition does, it is the equivalent of losing two games in one as you see your competition climb the proverbial ladder above you.

The Acquisition Process Should Not Substitute Personal Communications

Overall, a happy company is a strong company, and this derives from the absolute foundations of team affairs. Particularly for companies with incoming acquisitions, if they brush off the notions of internal understanding, team bonding and healthy communication, then it is more likely than not that they will encounter unwanted problems in the future. Even as early as the acquisition process, “data rooms and software tools should augment, expedite and manage the voluminous amount of data and information… but they should not be a substitute for direct, personal communications.

After all, employees just like any human, are emotional beings and shouldn’t be treated in a mechanical or rigid manner. Overall, it is always in everyone’s interest to promote genuinely warm and open working relationships in any company.

Risk arbitrage and cross-border M&A

Risk Arbitrage and Cross-Border M&A

Many strategic as well as financial investors are familiar with the numerous advantages of cross-border M&A, including expanding into potentially lucrative new markets, establishing a presence near existing or new clients, building and smoothing out revenue streams and diversifying international business risk. Investors, however, may be less familiar with another potential advantage of cross-border M&A, that is the possibility of creating financial and operational value through an investment strategy known as risk arbitrage.

This article will provide a brief overview of the concept of risk arbitrage and then discuss how risk arbitrage principles can be used as part of an overall M&A strategy to identify investment opportunities, build firm value and reduce firm risk.


Even though when many people hear the words “risk arbitrage” highly speculative strategies that are confined to narrow corners of the M&A world often come to mind, risk arbitrage is a very simple concept that occurs in markets and applies to businesses every day. In financial markets, arbitrage refers to a situation where an asset can be purchased for a price in one market and sold at a higher price in another market. Risk arbitrage, on the other hand, refers to taking advantage of a mispricing of risk and the impact of that mispricing on credit or asset prices to either build firm value or prevent firm value from being lost.

To provide a simple example of risk arbitrage in the credit context, let’s say that a fair interest rate for a loan based on the risk of a company or an activity is 8%. If, assuming the same level of risk, a bank is willing to lend money at a price of 6%, this represents a clear risk arbitrage opportunity for borrowers. Similarly, if borrowers are willing to pay a 10% interest rate, this represents a clear risk arbitrage opportunity for lenders because borrowers are overpaying for the actual level of risk in connection with a loan that a creditor will take.

These opportunities also frequently arise with regard to asset purchases. To take another example, let’s assume that the capitalization rate for multifamily properties in a particular market is 6%, meaning that the price of the asset is derived by dividing the net operating income of the asset by 6%. If the real risk associated with a multifamily property in the market warrants a capitalization rate of 4%, this represents a risk arbitrage opportunity for buyers, because in practical terms it will reduce the price that is paid for an asset. Similarly, if the risks associated with a multifamily property warrant a capitalization rate of 8%, the opportunity to sell the property at a capitalization rate of 6% represents a risk arbitrage opportunity for sellers because the buyer is effectively discounting asset risk by 2%.

It may well be asked how these types of opportunities can exist, as one would assume that if a risk arbitrage opportunity existed, buyers and sellers would immediately take advantage of these opportunities and the resulting market pressures would quickly cause the arbitrage spread to disappear. However, often the arbitrage spread does not disappear, principally because of three key reasons:

1) Information necessary to accurately price assets is often not available, particularly with respect to companies that are not publicly traded;

2) Assets and the market context that defines asset values are in a constant state of change which causes risk levels to fluctuate faster than they can be converted into accurate pricing terms;

3) Misperceptions of risk exist even in the face of clear information.

Risk Arbitrage and Cross-Border M&A

Risk arbitrage opportunities often exist in cross-border M&A, particularly in emerging markets due to the fact that information regarding market fundamentals or assets may be more difficult to obtain or key market drivers, such as inflation rates or currency values, may be more volatile than in more developed markets.

It commonly occurs in emerging markets, for example, that investors may assume that because a country is considered to be “risky” and companies or assets in that country by definition must be equally risky. In fact, many companies that operate in riskier jurisdictions adopt measures that protect themselves from risk such as, for example, having operations or assets abroad or hedging against currency risk. Because of this, the acquisition of a company at a discount rate of 15% to reflect country risk, when in fact the company’s risk profile merits a discount rate of only 12%, implies a risk arbitrage gain of 3%.

Risk arbitrage opportunities can also occur in highly stable markets where risk pricing in the market does not reflect real levels of company, sector or market risk. In this type of situation, assets can be sold at a price in excess of the price which reflects real market risk, creating a risk arbitrage gain.

In addition to risk arbitrage gains at the time of asset purchase, it is also possible to realize arbitrage gains throughout a company’s operation. For example, for a real estate development company, developing projects in a country where credit is mispriced can increase profitability and reduce market risk.

Risk Arbitrage and Investment Exit Issues

Many risk arbitrage strategies are employed with assets that have deep and liquid trading markets, such as publicly traded securities, so that once arbitrage opportunities are captured they can be quickly monetized. In the private M&A context, however, investors may hold an investment for many years and it can occur that the market context can significantly change over time and assets that are bought at a discount in year 1 may need to be sold at an even larger discount in year 5 due to a worsening of market risk perceptions.

For this reason, for investors that take a long-term view of strategy and building company value, risk arbitrage should generally not be used as the sole criteria for making an investment but rather as part of larger strategic investment decision that takes into account the investor’s overall strategy and the value that the acquisition of an asset or presence in a country will create irrespective of arbitrage gains.


This article was written by Darin Bifani. If you would like to discuss the potential for using risk arbitrage principles as part of a cross-border M&A strategy, please

ONEtoONE M&A Deal advised ICT field

Deal advised in the tourism and ICT field: Grupo CMC acquires Brújula

Grupo CMC acquires Brújula, positioning itself as the business solutions provider of reference in the tourism sector

Grupo CMC, a Spanish consulting firm in the Information and Communications Technology (ICT) field, becomes one of the leading suppliers of technological solutions and ICT services for the tourism sector, with the integration of Brújula – Information Technologies , founded in 2000 and one of the most renowned firms in this market. The counsel of the mandate was ONEtoONE Corporate Finance.

Important M&A deal in the tourism and ICT sector

This acquisition will provide synergies to Grupo CMC with regards to the tourism sector, taking advantage of the strengths of both organizations. Thus, Grupo CMC will add positioning and technological specialization of Brújula in the tourism sector to its experience in technological solutions to transform businesses in the digital economy. In its portfolio, Brújula has leader companies in this sector as clients, as well as a very consolidated presence in the Balearian business network.

Through this acquisition, Grupo CMC will offer cutting-edge technology to the turistic sector. The company is already consolidated in other sectors like Telecommunication, Utilities, Infrastructures, Automotive and Retail, integrating IoT solutions, Artificial Intelligence, big data, advanced analytics and Cybersecurity

Goals of the deal advised by ONEtoONE

In this context, Grupo CMC wants to take part in the Spanish tourism sector’s international growth. The Group is already present in Portugal, Italy, Mexico and Colombia.

Grupo CMC closed 2017 with a 36,3 million Euro turnover and, according to the economic forecast, the tourism business will represent 18% of the total turnover, and by the end of 2018, they will amount to a figure greater than 56 million Euros.

Grupo CMC increased its number of staff and now employs 820 professionals who are now working for the company. In 2016 they employed 750 professionals. Through this acquistion, their staff has grown by 150.

Agriculture Sector M&A and Earnouts

As in every sector, agriculture company owners and investors often disagree on valuation when  negotiating the terms of a potential company sale.  This is particularly the case when a valuation is based on a company’s future cash flows, which may be very difficult to reasonably forecast given the inherent volatility of agriculture commodity prices.  This uncertainty can be compounded by numerous production maturity cycle, company and agriculture sector-specific risks, such as weather.

To overcome potential deal breaking impasses that arise due to valuation issues, one possible solution is an earnout.  Earnouts are often used by private equity investors in M&A deals where the future cash flows of a business are difficult to predict or, alternatively, a company’s future business results are highly dependent on the post-deal closure commitment and performance of the sellers.  This has become an increasingly important issue in cross-border agriculture sector M&A, where investors may not have specific agriculture sector expertise and, even if they do, they may lack the ability to effectively manage a company’s business in what may be a new agriculture vertical or operating environment.

In simple terms, an earnout is a mechanism where the payment of a portion of the purchase price in a M&A transaction is deferred until a point in time in the future when pre-agreed financial or operating targets are met.  These financial targets can be based on revenues, EBITDA, EBIT or net income.  The amount of the purchase price that is deferred depends on the nature of the transaction, but factors that can affect the amount of the payment deferral are the size of the transaction, how far the parties are apart on valuation and the riskiness of future business cash flows.  How far in the future the earnout mechanism is structured also varies, but many investors would likely structure the earnout period around the investor’s planned investment horizon or the occurrence of certain key future events that will have a major impact on business performance, such as the implementation of a major new production project.

There are several challenges with using earnouts for both buyers and sellers.  Apart from the obvious issue that for the seller a significant portion of deal compensation may be deferred potentially for years into the future, the quick receipt of which may have been the key reason for the transaction in the first place, another issue is that both the buyer and seller can have incentives to manipulate earnout triggers to raise or lower the deal payout in a way that is not in the best overall interests of the business.

If the seller will remain in control of the business and the earnout is structured based on revenues, it may be possible for the seller to increase revenues by significantly increasing underlying costs, which helps the seller financially but may harm the overall financial performance of the business. On the other hand, if the buyer is in control of the business and the earnout trigger is based on a financial metric, it may be possible for the buyer to manipulate costs so that lesser earnouts in favor of the seller are paid.  Even in situations where the seller remains in control of the business and a revenue-based earnout is used, a seller may object because factors which drive agriculture sector commodity revenues are generally not in the seller’s control.

Despite potential drawbacks, the earnout remains an important mechanism to keep in mind when the parties to an agriculture M&A deal do not agree on valuation terms.  Properly structured, an earnout can help the parties share risk and, perhaps more importantly, align the interests of both the buyer and seller in the post-sale period so that both parties ultimately benefit.

Article written by Darin Bifani.

Ramp up your exit schedule and run the wave

Mergers and acquisitions come in waves. We are in one of those waves.

Trying to sell at the point where buyers are paying over the odds is a good strategy.

Today there is an excess of liquidity in the USA, Asia and Europe and easy access to cheap debt for anyone asking for loans or credits. This has resulted in an increase in the price of assets and stocks, which has created a general feeling of M&A possibilities.

Having money and access to cheap credit means that companies are willing to get into debt in order to buy other businesses, reaching record highs of acquisitions.

Access to credit plays an important role as a catalyst for corporate transactions.

The possibility to get debt cheaply due to low interest rates results in more corporate transactions.

Stock markets are at their highest. When companies are worth more they can also buy companies at higher prices by paying in shares. Overvalued stocks are then exchanged for undervalued securities or assets. This happens mainly when companies trade at higher multiples in the stock market.

We are witnessing and increate in M&A activity and reported valuations are trending above anyone´s expectations.

If you are ponder the possibility of selling your company in the near future, consider ramping up your exit schedule to fast-track your plans.

To sell a company takes time. Don’t be too late. 

Don´t forget that today negative interest rates everywhere sings a global economic malaise on the forecast and that malaise is likely to affect us all for the decade to come.

Article written by Enrique Quemada.

Due Diligence, a litmus test in the buying/selling of a company?

Imagine that you are going to buy a flat but you have only been able to view it in photos. You liked what you have seen up to this point but ¿would you really buy it based on a couple a photos? I’m sure the answer in no. Something similar happens during the process of buying/selling a company. The potential buyer only sees the “photos” that the seller wants to show him. The due diligence process is the way the buyer gets to know about the actual state of the company and whether or not these photos are “photoshopped”.

Every buyer of a company specifies knowing the company’s real situation by means of an assessment, due diligence, which encompasses not only the financial side of the business, but also the legal, work, environmental aspects etc.

Traditionally due diligence is carried by the buyer once their offer (subject to due diligence) has been accepted. Normally realised between four and eight weeks, in which period the buy/sell contract is, in a parallel fashion, negotiated.

It is worth highlighting that the buyer usually requests exclusivity during this period if he/she is going to have to spend money on due diligence and it is normal to concede it. However, you should bear in mind that seller, while the due diligence process is ongoing, will maintain negotiations with a single buyer and running the risk that he/she may, by being in exclusivity, demand a final discount on the price.

Once due diligence has been finalised, the results can be an essential tool to verify whether the price offered is adequate. Consequently, the buyer has the ability to use them as a tool for negotiating the price and contract terms. This, combined with the fact that usually the seller is not conscious of his/her shortcomings until the buyer discovers them in due diligence, which can put the seller in a weak negotiatory position.

As well as this, it can happen that the seller may need to formalise the purchase urgently, thus he/she proceeds quickly to the contract signing, but will establish as a condition that the buyer was satisfied with the results of the due diligence, which we would be carried out in a more restrictive timeframe.

Without a doubt, the due diligence process is crucial in a buy/sell operation, it is the way to come across (or not) the potential “tweaks” needed relating to the company for sale.

The Company, or the Business?

Are you thinking about buying that company that you love?

You have already decided and you have succeeded in advancing a few steps in the buying/selling process with the owner of the company. However, you are confronted with one of the most complicated problems of the operation: the seller’s understanding of the inequality that exists between the value of the shares and the debt accumulated.

The most efficient method, as a buyer, to cross this obstacle and achieve your objective is to present the business to the buyer, rather than the company. This represents for you the most advantageous alternative, because with an acquisition you avoid the debt that the company has with the banks and the responsibilities from past events. These would remain with the company and in the hands of the seller while you, as the buyer, avoid the risks.

You may arrive faced with a company with a lot of debt, but if you put a price only on the business, the seller will understand better that you are implying that his shares are not worth anything. Since you are buying the business free of debt, you, as a buyer, also have the option of requesting a bank loan to complete the purchase and pay the seller. The reasoning of the banker will be due to the fact that the business has no debt, you will be able to repay the financing with the funds generated by the same business.

As you can see, it is more convenient to buy the business rather than the company because you avoid many risks that could harm you later down the line. The question now is: will it also be the most convenient option for the seller? In reality, the seller is left with the debt and will have to pay more taxes. However, it is an option to be evaluated and one which ought to be explored at the time of purchase.

Mergers & Acquisitions, Compraventa de empresas

Many M&A “advisors” are not effective

It is normal for a business owner who thinks about selling his company to be afraid of hiring advisors.

It is a key decision, there is a lot on the line, and many things are going through his head:

“Are they really going to fight for my best interest?
Do they really have a large enough contact base to sell this?
What if they charge me a lot of money, make we work, play around and then nothing really happens?”

These are all legitimate feelings; choosing the right advisor can be the difference between being able to sell your company or not, between maximizing its value or selling it poorly.

It is true, a lot of “advisors” don’t do an effective work. They are good at documentation, valuations, analysis, etc. But they don’t know how to locate the right buyer, they don’t have the technical resources and man power needed, so they can’t spend the necessary time to find the right buyer. That’s why regardless of their efforts and great skills they fail to sell your company and let you down.

A lot of “advisors” do not know how to locate every possible buyer around the world to find the best fit for your company, ideally the one that will pay the most, or they simply don’t have the resources to do it.

Due to this they are unable to find multiple buyers to start an auction, generating competition, which would drive your company price up and maximize its enterprise value.

Our experience in dealing with more than 1000 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 work load that can’t 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 it is the most important operation 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.

Written by Enrique Quemada, president of ONEtoONE Corporate Finance.

Mergers & Acquisitions, Compraventa de empresas, Enrique Quemada