The global Information Technology industry encompasses the sectors of hardware, software and services, telecom, and emerging tech including ‘as-a-service’ solutions under the umbrella of the Internet of Things (IoT) and automating technologies.

 The global IT industry is projected to reach $5.2 trillion in 2020, with global spending growing 3.7%

As the world continues to be more digitally connected and industries become more automated, technology will remain a massively growing market in the beginning of the new decade, especially as companies focus less on cost reduction and more on innovation.

The United States is the world’s largest tech market, accounting for one-third of the total market, and exceeding the gross domestic product of most other industries. Although the US market is so large, the lion’s share of tech spending actually happens outside of the US (68%) and is made by enterprise or government entities. Western Europe is a major contributor in the global tech market, and China is also a significant player with focuses in robotics, infrastructure, software, and services.

Forecasted IT Spending

In 2020, IT spending budgets will be largely driven by the needs to upgrade outdated infrastructure, address security issues, and accommodate growth. The amount of spending and the mix of services will vary by company size.

• Smaller businesses are expected to spend more on hardware such as servers and laptops.
• Mid-size companies will be spending more on mobile devices.
• Larger corporations will spend more on managed infrastructure IT services such as power and climate solutions.

For software spending specifically, small businesses will focus their spending on operating systems. Mid-size companies will have a larger budget for productivity software and business support applications. Large enterprises will be spending more of their money on virtualization, database management, and communications software. Cloud services and recovery software will represent major budget allocations in the coming year and cloud spend will vary by company size.

Cloud Security

With the increasing popularity of cloud-based software and services and hybrid cloud solutions comes the increasing concern regarding cloud security. This is further reinforced by an ongoing rise in cyber attacks and data breaches. Cloud-based security solutions will remain a growing need across several sectors, especially in highly regulated ones such as finance and government. The global cloud security market was anticipated to garner $8.9 billion by the start of 2020. This need will create more opportunities for companies, entrepreneurs and investors.

The Year of 5G

The highly anticipated 5G technology will see a much more momentous rollout in 2020, in contrast to the lackluster emergence in 2019. Hundreds of millions of 5G-enabled smartphones are expected to ship in 2020. 5G will deliver significantly high speeds and remarkable data capacity to expand the financial possibilities for businesses. It is able to support billions of connected devices across sectors, allow new innovation for the IoT, Artificial Intelligence, and Virtual Reality. It will also enable a new world of autonomous vehicles and smart cities through a fully connected society, shattering boundaries to create a scalable global marketplace through unified technologies. Businesses will need to be prepared with how this new technology is going to dramatically alter the possibilities of the cloud and the need for virtualization-based networks as opposed to fixed-function equipment. While it is not going to happen overnight, 5G technology will grow increasingly more available throughout 2020, changing the availability of certain devices and transforming industrial possibilities.

Edge Computing

Edge computing is not a new concept, as it has existed for years. However, the value opportunity that it represents across industries is enormous. 2020 is anticipated to be a highly emergent year for edge computing due to the availability of faster networking technologies such as 5G and analytic capabilities in smaller devices.

Edge computing allows data processing to be done physically closer to where the data is generated (the edge of the network) rather than at a massive data processing center, which in turn reduces latency and processes the data much faster. This opens up countless new opportunities. Additionally, this technology offers several benefits for businesses, such as reduced costs, improved energy efficiencies, predictive maintenance, increased reliability, smart manufacturing, and security enhancements.

Let’s Talk Soon

At Benchmark International, our team of M&A advisors is ready to help you plan the next steps for you and your company. Whether it is selling your business, creating an exit strategy, seeking investor assistance, or finding ways to create growth, we are here to work on your terms to help you make your future as bright as possible.

Once you have decided it is the right time to sell your company, it’s time to find the right buyer. You are going to want to sell to someone that shares your vision for the business that you worked so hard to build. At the same time, you do not want to waste your time on prospects that are not serious or financially fit. An important step in the vetting process is knowing what information you should request from potential buyers. Start by reviewing this list of questions to generate additional ideas and help you manage expectations. 

“Do you have prior experience with acquiring a business?”

A buyer’s track record is paramount when considering whether or not they have the necessary resources and competencies to handle an acquisition. What is their experience? Do they have any success stories? What about failures? Nobody wants to sell to someone who has acquired businesses only to see them fail.  

“Why are you interested in buying my business?”

Understanding a buyer’s motives is crucial when seeking someone who is going to operate in the best interests of your company. If they share a passion for what you created and have a solid plan to build upon that success, they are far more likely to take your business in the right direction. Asking this question can also help you ascertain how serious they are about working towards a deal.

“How do you plan to finance the sale?”

Securing capital is often complicated and you can learn a great deal about a buyer from their answer to this question. It will demonstrate how experienced and how serious they truly are, helping you to weed out the dreamers. How do they plan to structure the deal? Can they prove that they have the funds available? How much cash is on the table? A serious buyer is going to be adequately prepared to answer this question and may even provide documentation.  

“How long have you been looking to acquire a business?”

This is a serious question when it comes to avoiding giant wastes of your time. There are people who will claim to be eager and ready to invest in a business, but they really are more interested in talking about the idea of it, as opposed to actually sealing any deal. How many deals have they passed on, and why? Ask for explanations. Sometimes deals simply do not work out. But if someone has a routine of waiting around for the perfect deal for years, you probably want to move on.

“How do you plan to carry on the legacy of my family business?”

If you have a family-owned business, it is likely that it matters to you that the company’s legacy remains in tact. This means you need to find a buyer that cares about maintaining its heritage and has a plan to do so. If you have family that will continue to be employed with the company, you will want assurance that the new owner is including them in their plans.

Don’t go it alone.

There are many considerations when seeking the right buyer for your business. To help you navigate the entire process, it is vastly beneficial to partner with a mergers and acquisitions firm that has the connections and resources to match you with the right investor. A firm that cares about the future of your business. The experts at Benchmark International will do all the homework for you and protect your interests to ensure that you get the very best deal possible.  

If you are thinking of growing your business on an international level, it might be worth considering partnering with another company through a merger or acquisition, due to these three benefits: 

New Markets

International expansion allows access to new markets and a greater reach to more of these consumers, thus increasing sales. While this can be achieved by establishing a branch or subsidiary, a merger or acquisition could save time and money spent on starting a business from scratch.

Partnering with a company in a smaller country can be particularly fruitful, as the smaller the country, the larger the access to its market.

Diversification

An advantage of an international merger or acquisition is a wider range of services or products can be explored. This helps a business in diversifying their assets, protecting the bottom line against unforeseen circumstances. For instance, companies with international operations can offset negative growth in one market by operating successfully in another. Companies can also utilise international markets to introduce unique products and services, which can help maintain a positive revenue stream.

For example, Coca-Cola diversifies through global operations and recently reported increased sales in China, India and South Korea, which benefited Coca-Cola worldwide.

Obtaining Access to a Talented Workforce

One of the conditions for merging with, or acquiring, another company is to retain the staff and integrate them in the new company, which are legal requirements imposed by national and international regulations. The benefit is that international labour can offer companies unique advantages in terms of increased productivity, advanced language skills, diverse educational backgrounds and more.

If the above appeals to you it might be time to contact an experienced mergers and acquisitions specialist to talk through the next steps. 

WE ARE READY WHEN YOU ARE

Call Benchmark International today if you are interested in an exit or growth strategy or if you are interested in acquiring.

The Mergers and Acquisitions (M&A) process is exhausting. For most sellers, it’s a one-time experience like no other and a marathon business event. When done well, the process begins far in advance of the daunting “due diligence” phase and ends well beyond deal completion. This Seller’s guide summarizes key, and often overlooked, steps in a successful M&A process.

Phase I: Preparation – Tidy Up and Create Your Dream Team.

Of course, our own kids are the best and brightest, and bring us great pride and joy. Business owners tend to be just as proud of the company they’ve built, the success of their creation, and the uniqueness of their offering. Sometimes this can cloud an objective view of opportunities for improvement that will drive incremental value in a M&A transaction.

For starters, sellers must ensure that company financial statements are in order. Few things scare off buyers or devalue a business more than sloppy financials. A buyer’s Quality of Earnings review during due diligence is the wrong time to identify common issues such as inconsistent application of the matching principle, classifying costs as capital vs. expense, improper accrual accounting, or unsubstantiated entries. In addition, the ability to quickly produce detailed reports – income statement; balance sheet; supplier, customer, product, and service line details; aging reports; certificates and licenses; and cost details – will not only drive up buyer confidence and valuations, but also streamline the overall process.

Key in accomplishing the items above as well as a successful transaction is having the right team in place. Customarily, this doesn’t involve a seller’s internal team as much as his or her outside trusted advisors and subject matter experts. These include a great CFO or accountant, a sell-side M&A broker, a M&A attorney, and a tax and wealth manager. There are countless stories of disappointed sellers who regretted consummating a less-than-favorable transaction after “doing it on their own.” The fees paid to these outside subject matter experts is generally a small part of the overall transaction value and pays for itself in transaction efficiency and improved deal economics.

Phase II: On Market – Sell It!

At this stage, sellers that have enlisted the help of a good M&A broker have few concerns. The best M&A advisors are very hands on and will manage a robust process that includes the creation of world class marketing materials, outreach breadth and depth, access to effective buyers, client preparation, and ongoing education and updates. The seller’s focus is, well, selling! With their advisor’s guidance, a ready seller has prepared in advance for calls and site visits. This includes thinking through the tough questions from buyers, rehearsing their pitch, articulating simple and clear messages regarding the company’s unique value propositions, tailoring growth ideas to suit different types of buyers, and readying the property to be “shown.”

Most importantly, sellers need to ensure their business delivers excellent financial performance during this time, another certain make-or-break criterion for a strong valuation and deal completion. In fact, many purchase price values are tied directly to the company’s trailing 12-month (TTM) performance at or near the time of close. For a seller, it can feel like having two full time jobs, simultaneously managing record company results and the M&A process, which is precisely why sellers should have a quality M&A broker by their side. During the sale process, which usually takes at least several months, valuations are directly impacted, up or down, based on the company’s TTM performance. And, given that valuations are typically based on a multiple of earnings, each dollar change in company earnings can have a 5 or 10 dollar change in valuation. At a minimum, sellers should run their business in the “normal course”, as if they weren’t contemplating a sale. The best outcomes are achieved when company performance is strong and sellers sprint through the finish line.

Phase III: Due Diligence – Time Kills Deals!

Once an offer is received, successfully negotiated with the help of an advisor, and accepted, due diligence begins. While the bulk of the cost for this phase is borne by the buyer, the effort is equally shared by both sides. It’s best to think of this phase as a series of sprints and remember the all-important M&A adage, “time kills deals!” Time kills deals because it introduces risk: business performance risk, buyer financing, budget, or portfolio risk, market risk, customer demand and supplier performance risks, litigation risk, employee retention risk, and so on. Once an offer is received and both sides wish to consummate a transaction, it especially behooves the seller to speed through this process as quickly as possible and avoid becoming a statistic in failed M&A deals.

The first sprint involves populating a virtual data room with the requested data, reports, and files that a buyer needs in order to conduct due diligence. The data request can seem daunting and may include over 100 items. Preparation in the first phase will come in handy here, as will assistance from the seller’s support team. The M&A broker is especially key in supporting, managing, and prioritizing items for the data room – based on the buyer’s due diligence sequence – and keeping all parties aligned and on track.

The second sprint requires excellent responsiveness by the seller. As the buyer reviews data and conducts analysis, questions will arise. Immediately addressing these questions keeps the process on track and avoids raising concerns. This phase likely also includes site visits by the buyer and third parties for on-site financial and environmental reviews, and property appraisals. They should be scheduled and completed without delay.

The third and final due diligence sprint involves negotiating the final purchase contract and supporting schedules, exhibits, and agreements; also known as “turning documents.” The seller’s M&A attorney is key in this phase. This is not the time for a generalist attorney or one that specializes in litigation, patent law, family law, or corporate law, or happens to be a friend of the family. Skilled M&A attorneys, like medical specialists, specialize in successfully completing M&A transactions on behalf of their clients. Their familiarity with M&A contracts and supporting documents, market norms, and skill in selecting and negotiating the right deal points, is the best insurance for a seller seeking a clean transaction with lasting success.

Phase IV: Post Sale – You’ve Got One Shot.

Whether a seller’s passion post-sale is continuing to grow the business, retire, travel, support charity, or a combination of these, once again, preparation is key. Unfortunately, many sellers don’t think about wealth management soon enough. A wealth advisor can and should provide input throughout the M&A process. Up front, they can assist in determining valuations needed to achieve the seller’s long-term goals. When negotiating offers and during due diligence, they encourage deal structures that optimize the seller’s cash flow and tax position. And post-close, sellers will greatly benefit from wealth management strategies, cash flow optimization, wealth transfer, investment strategies, and strategic philanthropy. Proper planning for post-sale success must start early and it takes time; and, it’s critical to have the right team of experienced professionals in place.

The M&A process is complex, it usually has huge implications for a seller and his or her company and family, and most sellers will only experience it once in a lifetime. Preparing in advance, building and leveraging the expertise of a dream team, and acting with a sense of urgency throughout the process will minimize risk, maximize the probability of a successful M&A transaction, and contribute to the seller’s success and satisfaction long after the
deal closes.

When you first started your own business, you were probably brimming with entrepreneurial spirit, otherwise the company would never have got off the ground in the first place. Now, however, you are feeling lacklustre towards your business, as the mundane tasks to keep the business going are taking over and hampering your entrepreneurial spirit. Here are four steps to take action and get your business moving forward again:

Delegate Tasks

As your business grows you might find yourself doing increasingly more menial tasks to keep the business going. To ensure you have time to focus on the business, these tasks need to be delegated. Granted, this is easier said than done as you might want to stay in control rather than train somebody else to do them; however, if you continue to do this you are working in the business rather than on it. To ensure that you are the visionary and troubleshooter that you need to be, delegate work – you’ll be able to work on the bigger picture and your employees will appreciate the trust and responsibility you give to them.

Work on Goals for the Year Ahead

If you have got to a point where you have grown from a start-up then it might seem like the largest hurdle has been overcome. Nevertheless, you need to keep this momentum going to watch the company flourish. To do this, it’s a good idea to have plans and goals for the upcoming year, setting aside time to break down your goals into smaller steps with these to be actioned monthly, or even weekly. If these tasks are scheduled, and you ensure they are actioned, then this helps to make sure these goals are accomplished.

Encourage Innovation

If the day-to-day has become monotonous and the business is plateauing then you might want to encourage innovation to take the business in a new direction. To innovate it is useful to listen to both your customers and employees, as well as encourage your employees to take risks and think outside the box. This way, new ideas can be created and prevent the business from stagnating.

Take Some Time Out of the Business

Taking some time out of the business can help you to recharge. Whether this be scheduling time for yourself each evening, making sure you take time off at the weekend, or going on holiday, taking time out can help you to take a step away from the business and refresh, helping to stimulate fresh ideas.

Date:
Tuesday, February 12th at 10:00am - 11:00am EST

Details:

Maximizing value isn’t only about the headline price. It’s about getting the deal right, using your leverage when you have it, and knowing where you stand in the deal at all times. 

Sellers lose more money at the Term Sheet stage than in any other part of the process. Buyers know the ins and outs. They know how to best use the Term Sheet and the process that surrounds it to make their offers look better than they might end up being. For sellers, this is typically the least understood part of the company sale process. This experience gap is unfortunate for sellers because it results in not only lost value but at times the loss of the entire deal; a loss that comes after a great deal of financial and emotional investment. 

For sellers to truly maximize the value of their business in a sale, they must look beyond the headline number that usually appears in the first paragraph of the Term Sheet and understand the other key value drivers in the rest of the document. If the headline number was the only key term, Term Sheet’s would be one paragraph long. This quick introduction will concentrate on the 12 most common sell-side errors in the Term Sheet process.

Hosts:

Clinton Johnston
Managing Director
Benchmark International

So you’ve made the big decision – you’re going to sell your business. This is likely a stressful time for you as have probably spent a lot of time and resource building up the company and may be nervous about seeing it pass over to new hands. So, from here on in, you would like to minimise the amount of stress involved by avoiding any mistakes which can easily be averted. The following are common mistakes to avoid and how Benchmark International can help:

Only Pursuing the Largest Acquirer

Surely pursuing the largest acquirer is in your best interests as they will be able to afford a premium for the company?

While they may be able to pay a premium for the company, they may not necessarily do so. An acquirer is likely to pay a premium for your company because there are synergies in place such as similar markets, products or customers that could be combined, but a large acquirer typically does not need to make the acquisition to enter these markets. An acquisitive party could also benefit from economies of scale and, therefore, will pay more for the target, but a large acquirer is unlikely to benefit from this. Even if a large acquirer is willing to pay a premium, they may absorb operations into their own company, which can cause complications for the handover, particularly if you are loyal to existing staff.

How Benchmark International Can Help: Look at all aspects of the deal and how it can benefit your company. Benchmark International can assist with sourcing the best fit for your company.

Not Looking at the Bigger Picture

You’ve just received an offer from a potential acquirer – on the surface of it, it looks good, surpassing your expectations. However, the structure of the deal as a whole needs to be considered, not just the total value. For example, the consideration could be deferred, or contingent on future earnings, meaning you are not receiving all cash upon completion. It is also important that if you do decide on a structured deal, that these elements are protected, ensuring you receive the consideration.  

How Benchmark International Can Help: Benchmark International will thoroughly analyse all offers received, negotiate earn-out protections and can assess any contingent targets to ensure that the seller is able to maximise the consideration received. 

Not Creating Competitive Tension

It can certainly be a benefit to enter into the M&A process with potential acquirers in mind, perhaps one of these has even approached you at some point. However, even though it may be tempting to dive straight into a deal with an acquirer that wants you and complements your company perfectly, it is still vital to create competitive tension by generating interest from other potential acquirers. If the acquirer in mind can sense that they are the only one with an offer on the table and that you are anxious to sell to them, they could take advantage of this with a low offer.

How Benchmark International Can Help: Benchmark International will employ an approach where all potential acquirers are approached and exhausted before accepting any offers.

Using an M&A Sector Specialist

This may seem like an odd ‘mistake’ to make – why wouldn’t you want to use an M&A specialist operating specifically in your sector, surely you don’t want a generalist?

The reasoning behind this is that a general M&A firm will be able to think outside the box and target a large pool of acquirers, not limiting itself to those just in your sector.

How Benchmark International Can Help: Benchmark International has a vast and growing number of contacts giving you the best chances of receiving multiple offers, as well as significant experience across a broad number of sectors, leveraging this to identify the areas where the greatest synergies can be exploited.

Leaving it Too Long

To obtain the best price and right fit for your company, it is crucial to enter the market at the right time. It is important to strike a balance between seeking to sell when the company is on a growth curve, but also not missing the window of opportunity in the market cycle. Equally, it is important not to sell when you become desperate (e.g. you are looking at retiring soon) as acquirers could become aware of this and lower their offer accordingly.

How Benchmark International Can Help: Look at selling earlier than anticipated, not when you want an imminent exit. Benchmark International can best advise on when the right time is
to sell.

Neglecting the Day-to-Day Running of the Business

M&A transactions can be time consuming, but it is important not to let it get in the way of running the business. If an acquirer is interested in the business because profits are increasing, or a new product is due to be released to the market, for example, and this does not come into fruition because  you have taken your eye off the ball, then this could lead a buyer to renegotiate, or call the whole deal off.

How Benchmark International Can Help: The pressure of selling your business can be alleviated by Benchmark International as it will handle negotiations, leaving you to focus on running your company.

Not Negotiating Effectively at Critical Stages

Offers may go back and forth between yourself and the potential acquirer and at this point you are in a good position to negotiate. It is not until the Letter of Intent (LoI) is signed that the advantage swings to the buyer. Although the LoI is not typically legally binding it does usually stipulate a period where the seller cannot pursue further leads in the market (an exclusivity period), so competitive tension is lost. It is important, therefore, that you are completely happy with the terms (which can include such things as price, length of the exclusivity period etc.) before the LoI is signed to avoid either having to back out of a deal that could have been lucrative or being tied to a lengthy exclusivity period.

How Benchmark International Can Help: In all stages of negotiating, Benchmark International will do this on your behalf with your best interests in mind.

Author:
Lee Ritchie
Senior Director
Benchmark International

T: +44 (0) 1865 410 050
E: Ritchie@benchmarkcorporate.com

The Mergers and Acquisitions (M&A) process is exhausting. For most sellers, it’s a one-time experience like no other and a marathon business event. When done well, the process begins far in advance of the daunting “due diligence” phase and ends well beyond deal completion. This Seller’s guide summarizes key, and often overlooked, steps in a successful M&A process.

Phase I: Preparation – Tidy Up and Create Your Dream Team.

Of course, our own kids are the best and brightest, and bring us great pride and joy. Business owners tend to be just as proud of the company they’ve built, the success of their creation, and the uniqueness of their offering. Sometimes this can cloud an objective view of opportunities for improvement that will drive incremental value in a M&A transaction.

For starters, sellers must ensure that company financial statements are in order. Few things scare off buyers or devalue a business more than sloppy financials. A buyer’s Quality of Earnings review during due diligence is the wrong time to identify common issues such as inconsistent application of the matching principle, classifying costs as capital vs. expense, improper accrual accounting, or unsubstantiated entries. In addition, the ability to quickly produce detailed reports – income statement; balance sheet; supplier, customer, product, and service line details; aging reports; certificates and licenses; and cost details – will not only drive up buyer confidence and valuations, but also streamline the overall process.

Key in accomplishing the items above as well as a successful transaction is having the right team in place. Customarily, this doesn’t involve a seller’s internal team as much as his or her outside trusted advisors and subject matter experts. These include a great CFO or accountant, a sell-side M&A broker, a M&A attorney, and a tax and wealth manager. There are countless stories of disappointed sellers who regretted consummating a less-than-favorable transaction after “doing it on their own.” The fees paid to these outside subject matter experts is generally a small part of the overall transaction value and pays for itself in transaction efficiency and improved deal economics.

Phase II: On Market – Sell It!

At this stage, sellers that have enlisted the help of a good M&A broker have few concerns. The best M&A advisors are very hands on and will manage a robust process that includes the creation of world class marketing materials, outreach breadth and depth, access to effective buyers, client preparation, and ongoing education and updates. The seller’s focus is, well, selling! With their advisor’s guidance, a ready seller has prepared in advance for calls and site visits. This includes thinking through the tough questions from buyers, rehearsing their pitch, articulating simple and clear messages regarding the company’s unique value propositions, tailoring growth ideas to suit different types of buyers, and readying the property to be “shown.”

Most importantly, sellers need to ensure their business delivers excellent financial performance during this time, another certain make-or-break criterion for a strong valuation and deal completion. In fact, many purchase price values are tied directly to the company’s trailing 12-month (TTM) performance at or near the time of close. For a seller, it can feel like having two full time jobs, simultaneously managing record company results and the M&A process, which is precisely why sellers should have a quality M&A broker by their side. During the sale process, which usually takes at least several months, valuations are directly impacted, up or down, based on the company’s TTM performance. And, given that valuations are typically based on a multiple of earnings, each dollar change in company earnings can have a 5 or 10 dollar change in valuation. At a minimum, sellers should run their business in the “normal course”, as if they weren’t contemplating a sale. The best outcomes are achieved when company performance is strong and sellers sprint through the finish line.

Phase III: Due Diligence – Time Kills Deals!

Once an offer is received, successfully negotiated with the help of an advisor, and accepted, due diligence begins. While the bulk of the cost for this phase is borne by the buyer, the effort is equally shared by both sides. It’s best to think of this phase as a series of sprints and remember the all-important M&A adage, “time kills deals!” Time kills deals because it introduces risk: business performance risk, buyer financing, budget, or portfolio risk, market risk, customer demand and supplier performance risks, litigation risk, employee retention risk, and so on. Once an offer is received and both sides wish to consummate a transaction, it especially behooves the seller to speed through this process as quickly as possible and avoid becoming a statistic in failed M&A deals.

The first sprint involves populating a virtual data room with the requested data, reports, and files that a buyer needs in order to conduct due diligence. The data request can seem daunting and may include over 100 items. Preparation in the first phase will come in handy here, as will assistance from the seller’s support team. The M&A broker is especially key in supporting, managing, and prioritizing items for the data room – based on the buyer’s due diligence sequence – and keeping all parties aligned and on track.

The second sprint requires excellent responsiveness by the seller. As the buyer reviews data and conducts analysis, questions will arise. Immediately addressing these questions keeps the process on track and avoids raising concerns. This phase likely also includes site visits by the buyer and third parties for on-site financial and environmental reviews, and property appraisals. They should be scheduled and completed without delay.

The third and final due diligence sprint involves negotiating the final purchase contract and supporting schedules, exhibits, and agreements; also known as “turning documents.” The seller’s M&A attorney is key in this phase. This is not the time for a generalist attorney or one that specializes in litigation, patent law, family law, or corporate law, or happens to be a friend of the family. Skilled M&A attorneys, like medical specialists, specialize in successfully completing M&A transactions on behalf of their clients. Their familiarity with M&A contracts and supporting documents, market norms, and skill in selecting and negotiating the right deal points, is the best insurance for a seller seeking a clean transaction with lasting success.

Phase IV: Post Sale – You’ve Got One Shot.

Whether a seller’s passion post-sale is continuing to grow the business, retire, travel, support charity, or a combination of these, once again, preparation is key. Unfortunately, many sellers don’t think about wealth management soon enough. A wealth advisor can and should provide input throughout the M&A process. Up front, they can assist in determining valuations needed to achieve the seller’s long-term goals. When negotiating offers and during due diligence, they encourage deal structures that optimize the seller’s cash flow and tax position. And post-close, sellers will greatly benefit from wealth management strategies, cash flow optimization, wealth transfer, investment strategies, and strategic philanthropy. Proper planning for post-sale success must start early and it takes time; and, it’s critical to have the right team of experienced professionals in place.

The M&A process is complex, it usually has huge implications for a seller and his or her company and family, and most sellers will only experience it once in a lifetime. Preparing in advance, building and leveraging the expertise of a dream team, and acting with a sense of urgency throughout the process will minimize risk, maximize the probability of a successful M&A transaction, and contribute to the seller’s success and satisfaction long after the
deal closes.

Author:
Leo VanderSchuur
Transaction Director
Benchmark International

T:   +1 (813) 387 6044
E: VanderSchuur@benchmarkcorporate.com

The due diligence process is one of the final steps in an M&A transaction where the potential buyer does its obligation to best confirm and verify the seller's company data and relevant information. This information typically includes but not limited to: financials, IT, operations, legal & compliance, insurance, corporate bylaws, contracts, customers, among other important information. Typically, the due diligence process follows the execution of a letter of intent (LOI), a non-binding document outlining the intent of both parties to commit to the transaction.

Once the LOI has been executed, the buyer will request a list of items to be shared by the seller with the intention of disclosing the selling company’s key details that could uncover risk buyer. As mentioned before, items can range all the way from financials to operations to insurance to contracts, among others. In cases where the seller owns the real estate, additional documents pertaining to the real estate, such as: deeds, mortgages, tax documents, owners’ insurance, etc. will need to be provided. Given today’s advancements in technology, once the due diligence request list has been sent to the seller, the team leading the deal will proceed to open what we call in the M&A world a “virtual data room” or a “data room.” These two terms are referred to as online portals that hold and store the information requested by the buyer with high levels of security only available for certain parties, including: buyer, seller, M&A attorneys, CPAs, advisors, among others. The data room allows activity within the room to be tracked and archived so there is a file of the information exchange after closing should any issues arise.

Once the due diligence starts, it is highly recommended for the buyer to hold, at the very least, weekly meetings or calls with the seller to discuss outstanding items or any questions that may have arisen from the process. As the due diligence process progresses, the buyer will become more familiar with the seller’s company. For an instance, should the buyer find any items that may play against the seller in the due diligence process, the buyer may use this to lower the valuation of the business which may ultimately result in a lower offer price.

In addition, this process can result as a discovery of potential opportunity to better structure the deal, find real synergies among parties, review any benefits and challenges for potential system integrations, and any associated risks that may arise from the result of this potential acquisition. 

A recent article in the Harvard Business Review made a perhaps surprising conjecture: that as far as mergers and acquisitions are concerned, those companies that focus on what they’re going to get from an acquisition are less likely to succeed, in terms of the deal outcomes, than those companies that focus on what they can give to the process.

Acquiring companies being in ‘take’ mode was a dangerous place to be, it claimed. Indeed, corporate giants are not immune from this conundrum either, if we think about, for example, Microsoft and Google wanting to get into smartphone hardware in ‘taking’ from Nokia and Motorola respectively.

A buyer in ‘take’ mode means that the fortunate seller can increase price, especially if there is more than one potential buyer in the picture, and effectively remove the future value of the transaction. Buyers on the take, really knowing what they want, are also more prepared to pay top dollar – which, in and of itself, poses a problem in eventually getting a good return. But companies with a ‘getting’ focus also tend to lack adequate understanding of their new markets, making failure even more likely.

Having something to give to the deal, however, really benefits outcomes. This could mean anything that makes the acquired company more competitive in its market, and especially if the buyer is the only partner who can offer this new competitive edge.

The much-talked-about Harvard Business Review article listed four main ways that the ‘giving mode’ buyer can increase the competitiveness of the bought company and ultimately secure better outcomes on the deal:

You’re sitting at your desk eating your lunch and reviewing the emails in your inbox when your phone rings. You pick up, on the other end of the phone is an inquirer looking to purchase your company. You haven’t given much thought to whether or not you’re open to selling your business, and here is someone who is ready to purchase it right now. What do you do?

Engage the Right Support Team

First things first, congrats! You might not be thinking to sell right now, and that’s okay, but now you know there is interest in your enterprise. If this inquiry has sparked curiosity in you to explore the possibilities of a sale, you need to be prepared. How do you approach an offer for your business out of the blue? Well, you don’t go into it alone, that’s for sure. You need to have the appropriate team in place to assist you should you decide to explore your options. You will need a sell-side mergers and acquisitions specialist to help you navigate the waters of a sale and break down your options for you.

When it comes to selling your business, it’s okay to acknowledge that you don’t know what you don’t know. Having a mergers and acquisitions firm on your side can help you determine what the approximate value of your business is against others in the same market. Furthermore, you can discuss what your aspirations are for your business and what you hope to achieve from a sale.

What Do You Want?

A call that catches you off guard might have you thinking what the buyer’s intentions are, but you need to think about your intentions. If you consider selling your business seriously, what do you want from a sale?

 

‘To err is human’, it’s said … but for sellers and buyers alike, the M&A process is surely not a good time to make mistakes.

Timing is, without doubt, one of the most critical factors in mergers and acquisitions; a recent report found that it is, in fact, the single most reliable predictor in terms of creating real shareholder value.