Andrew Weaver CEO at www.lawyerfair.co.uk The legal procurement & comparison service for business owners
KPMG global M&A predictor is Back
Arrival of the latest KPMG global M&A predictor will have seen corporate finance departments across the land jumping for joy because … M&A is coming back my friend! The predictor foresees a resurgence of activity due to falling net debt to EBITDA ratios (not to mention the stacks of lovely cash that’s been stored away in the corporate attic during the recession!) Good days are allegedly here again and the CF community can finally dust off those old Sandy Lane brochures and ask the PA to book them some flights to Montego Bay.
KPMG Global M&A predictor strategies But what does this KPMG predictor and the change of atmosphere mean for the SME market and KPMG Global M&A strategies? What are the key factors to consider when engaging in the process? This is a brief intro …
Mergers Mergers are a great way for two smaller businesses to combine and prove that the sum is greater than the whole of its parts. Synergistic benefits and all that malarkey! Ideally it’s about the merger of two relatively equal (but not always) entities wherein the merger results in a strengthened market and financial position. Synergistic benefits (there I go again) should be the primary reason for conducting such a merger as it enables the combined entities to punch above their separate weights and generate greater overall muscle in the market.
Need mergers that went wrong? Of course, you don’t need to Google too hard to find mergers that went wrong. This Huffington post article explains some that epically failed It’s often the case that parties underestimate the differences between company cultures and the true cost of transition is often underestimated because it fails to take account of the value of critical intangibles such as human capital. & Acquisitions Acquisitions get lumped together with mergers but they’re as chalk and cheese as Rugby Union and Rugby League. OK, some similarities remain but you need to look beyond the oval ball. Generally (but not always) acquisitions involve a larger (or at least more profitable) business purchasing a smaller entity. Unlike a merger, in which two roughly equal companies combine, the purchasing company’s branding, organisational structure and management usually take over that of the smaller company though again, no two acquisitions are alike and if a key value driver of purchased business is embedded within their intangibles, then it’s often value destroying for the acquirer to completely consume the acquired …
And don’t misunderstand or underestimate how important it is for parties to negotiate on good terms. If your M&A education has been acquired via the movies then you might believe the hostile takeover strategies of Gordon Gekko rules the waves but in fact, most deals in the SME space are conducted amicably, not least because the departing owner is often keen to sell to people they like and who will protect the legacy and employees. It’s also often business critical for a buyer to maintain good relations with the vendor as they will remain integral to the ongoing success and growth of that business for some time after completion. Buying SMEs often brings with it a clash of cultures and systems. It sometimes needs patience to piece together so preparation is crucial in making sure you iron out as many potential problems as early as possible. You want to avoid burning time and cash in trying to piece together ill fitting companies and people. Preparation is Key
SWOT Analysis before undertaking the KPMG M&A route: A few headline issues to consider before undertaking the KPMG M&A route; SWOT analysis: OK, I’m finally making use of my GCSE business studies course but, conducting a SWOT analysis (strengths, weaknesses, opportunities and threats) of your own business is a crucial 1st step and it’s amazing how few businesses do so. Drilling down into this simple diagnostic will enable you to clearly understand any key issues that need to be addressed via a merger or acquisition target.
Things is required before launching KPMG M&A Predictor process.?
Start by conducting a clear and honest assessment of your own position and needs, before approaching the market. Most (but not all) acquirers are savvy enough to understand the gaps or opportunities within their own business and how they can be enhanced with a merger or acquisition however, businesses never stand still and the commercial world is built on shifting sand so it’s important always to maintain a stern eye on that SWOT and have a clear understanding of what is required in advance of launching an expensive KPMG M&A process.
Calculate the cost of KPMG global M&A predictor process: Getting involved in the KPMG Global M&A process is costly, in terms of money, time, people and managing your existing business. You need to think through the resources you have at your disposal to start and finish the process as well as the cost and impact of having some of that resource deflected over a prolonged period of time. This is a calculation based not only on the cost of the purchase itself but also the transaction costs and costs of integrating a new or merged company within your existing structure. The Huff Post article illustrates what can go wrong! If you’re acquiring a distressed company, wisely consider the extra costs of creating a turnaround plan and the time needed to implement it before you see a return. Get the right advisors and lawyers: Lots of advisors say they do M&A but not all of them have the necessary experience to help you negotiate the many potential tripwires. Bad advisors can actually destroy value and opportunity. Nothing beats experience in the KPMG global M&A predictor world and you need advisors who’ve seen it, done it and worn the t-shirt. Only they will see the deal breakers and skeletons weeks or months in advance and therefore help to minimise the risk of wasted costs,
aborted deals and lost time. Inexperienced advisors can blow achievable deals and a lot of resource. In particular, make sure your lawyer is a specialist. Get them on board early in the process so they can provide initial advice and guidance. They will also help you understand what should/shouldn’t be included in future negotiations. You don’t want to be agreeing terms which then unravel through due diligence or because of poorly managed heads and/or expectations. Parties who entered into a deal in good faith soon lose confidence in each other if goalposts need to be moved due to poor or no professional advice.
KPMG global M&A predictor Time framers Set the calendar: KPMG M&A time frames vary, but they’re rarely quick. Depending on the complexity of a particular business and/or the nature of the due diligence process etc. Assume 3-6 months from agreeing heads to achieving completion. Starting from scratch with an acquisition process, you could find it takes much, much longer. Not only do you have to find a target with the right synergies but you then have to negotiate the vendors’ price expectations before piecing together the fine detail of a complex process. It’s rarely quick and the acquiring or merging companies need to keep an eye on the shop whilst simultaneously managing a complex deal process.