Business Reporter · December 2015 · 13
AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE DAILY TELEGRAPH
The key to successful M&A strategy The key to successful deal-making is choice, whatever the sector. Choice creates the best deal-making environment and the best outcomes for all. Nothing comes close to the importance of generating a competitive environment. Our clients are typically owner-managers – many of whom have never bought or sold a company before – and they are often astonished to find that we can profile hundreds of potential
acquirers for their business. We go beyond the obvious to bring a range of acquirer types to the table, including listed acquirers, noted investors and private equity organisations. The search for a partner must be international, as M&A is global. Today, 31 per cent of our clients sell overseas. Partnership is key. In our marketplace acquirers and investors are looking for companies they can scale and build. Deal-making is not merely
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arge mergers often attract close attention from competition authorities. In order for a company to get a merger approved, a detailed investigation is frequently required. Massive amounts of documents and data must be analysed to make sure consumer choice isn’t harmed and competition rules are not broken. Neil Dryden (inset, below), executive vice president at Compass Lexecon, says: “The authorities have an appetite for probing any and all information relating to a transaction. The expectation has to be that any data-set that sheds light on how competition functions will be analysed.” These can include structured data-sets such as customer information, transaction details and competitor monitoring, as well as untold amounts of unstructured data in emails which may have been created in the years running up to the merger. Sometimes a company can invest many months undertaking “competition diligence” in advance of making an offer; other times a deal is conceived in a shorter timeframe as a particular situation unfolds. But regardless, similar analysis of data-sets and documents will be required by regulators and will determine whether a merger can go ahead or not. “If companies do not do competition diligence, the outcome of an investigation will be more unpredictable,” says Dryden. “We might not be able to advise in advance what the conclusion of the various analyses is likely to be. It will be much harder to predict whether the merger will be cleared or prohibited,
transactional – culture and “fit” are vital. In the right deal, the benefits must be clear – not just to acquirer and seller, but to customers, staff and other stakeholders too. David Rebbettes, left, is founding director of BCMS 01635 296 193 www.bcmscorporate.com/approach
Finding the right buyer is the key to maximising value
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Planning a mega-merger? Understanding competition rules is vital and what kind of divestments might be needed for it to proceed.” The guidance from the authorities is not always clear-cut, and there is no handbook from the regulators which states what is allowed and what is not. For example, while a merger might appear to create some upward pricing pressure, that might be counteracted by new entry. “Then the question is, how quick does the entry
have to be for the merger not to cause a concern?” Dryden says. “A lot of these issues are not very well defined. There is quite a lot of uncertainty.” A CEO’s opinion on what makes a market competitive may not be the same as that of a regulator. He says: “The one thing buyers have to be aware of is that the authorities’ concern about competition kicks in far below the level of what most would typically describe as a monopoly. So even in an ostensibly competitive market, authorities will still be concerned about potential
post-merger price rises.” Even when a deal does not complete, there is good news for companies that have gone through the competition diligence process. It will have enabled them to learn a lot about where they create value and what their real competitive constraints are. Although the process of analysing vast amounts of data might be arduous, it can add to firms’ understanding of how their markets truly work. +44 (0)20 3725 9007 NDryden @compasslexecon.com
aximising exit values is about finding the right buyer as much as making sure that your house is in order. The value of an acquisition is completely different to each potential buyer. One potential acquirer might be able to instantly double profit post-acquisition through better buying power, cost savings, complementary skills and cross selling. Another potential buyer might actually see a risk in profits reducing through potential loss of key relationships and key staff. The former buyer is always going to be prepared to pay a higher price than the latter. Therefore a clear understanding of a business is essential before going to market and applying this information to profiling the most likely buyer. A targeted approach using a highly researched list of buyers is always going to produce better results than a poorly researched scattergun
approach. One of the biggest risks for management in achieving best value is the disruptive effect of the sales process on the performance of the business. Therefore they do not need time wasted on inappropriate enquiries. Planning is the key to maximising sales value – target the right buyer and tell them why they should want to buy your business. Jeff Barber (above) is a partner at BTG Corporate Finance 0161 837 1800 www.begbiestraynorgroup.com