Each and every merger, acquisition and corporate finance project is of a temporary nature. Once completed, the need for such a transaction is typically fulfilled for a long period of time. Each such project is also critical to the company and its shareholders and each one is complex. The projects are finally very time-consuming for management and they spread over several months.
In this context, one needs to see the use of an external advisor as the temporary hiring of a very specialized manager with a very specific and time-limited assignment. With a view to free management of an urgent need and to seek an external viewpoint in the decision making process. Finally, to be in a position to validate a decision in the light of all pertinent markets.
For an entrepreneur, his company represents an important personal asset which is often the result of an entire life’s work. For an executive, selling a subsidiary or division is a major challenge which may have a significant impact on the parent company’s balance sheet. In either case, there is no turning back once the transaction has been concluded. Therefore, it is important not to make any mistakes. A specialist in mergers and acquisitions can provide you with the necessary expertise to successfully complete each step of the merger or sale process.
An intermediary is often called upon to play certain specific roles. One of the most important of these is to keep buyers interested and to assist them in order to ensure they submit attractive offers. It is difficult for the seller to do this himself without giving the impression of being in a weak position vis-à-vis the buyer.
An intermediary also acts as a buffer between buyer and seller, preventing any conflicts which could arise when emotions run high and ensuring that the channels of communication remain open between the two parties. All technical considerations aside, using an intermediary frees the management team from the time-consuming process of merging or selling the company, thereby allowing them to devote their day-to-day efforts to running it. Consequently, there is no risk of harm to the business during this period, with the disastrous impact this can often have on the interest of potential candidates
In our opinion, no intermediary can offer such a guarantee. However, our clients can rest assured that we will accept a mandate to sell only if we are convinced that the desired price can be obtained. The key to our approach is to set a price range based on a valuation carried out prior to the undertaking of the mandate. This strategy usually results in a selling price at least equal to, if not higher than, the asking price.
This approach prevents the disillusionment which invariably occurs when a client deals with a peddler who dazzles him with a totally unrealistic price. And, in addition to the disillusionment experienced by the client, there is the time wasted and damage done to the company as a result of this fruitless exercise. Peddlers such as these base their strategy on the law of average: the more mandates they have, the better their chances of completing a transaction. The result of this is a very low success rate.
Our strategy, however, is quite the opposite. We aim for a 100% success rate. During more than 20 years, we have achieved close to 90%. Therefore we only accept those assignments which we feel can be successfully completed. With Mergerac, there are no dazzling claims and no false promises. The only promise we do make is that we will put all of our resources at your disposal and devote all our efforts in helping you achieve the best possible deal.
The best way is to identify a “strategic buyer”, that is a buyer for whom your business will add value and result in synergies. This type of buyer is usually prepared to pay more for your company than any other type of buyer.
However, whether or not a strategic buyer is found, enough interest must be generated to obtain competing offers. At Mergerac, we regularly use this method, drawing up a list of potential buyers from our own databases and specialized directories. Where warranted, we also use our Pandion Partners network.
The final element of our strategy is intelligent negotiation with the potential buyers. The intermediary’s contribution in this area can be decisive. And much more is involved than just obtaining the best price for the company. An experienced intermediary will employ creativity and imagination to try to meet the requirements of both his client and the buyer, knowing that the transaction can only be concluded when both parties are satisfied.
There are really two ways of proceeding. The first is intended for clients who are not actively seeking an acquisition but who would be interested if the opportunity presented itself. In this case, our involvement is limited to entering their acquisition criteria in our own private database and contacting them when we learn of something which might be of interest to them.
Our second approach is aimed at clients for whom acquiring a company is a priority. These clients entrust us with the mandate of looking for a company that meets their criteria and, once found, of helping them acquire it.
Needless to say, the chances of finding a company are considerably greater with the second approach. Nevertheless, if a transaction is concluded, our overall fees will be the same in either case since the research fees applicable to the second method are usually deductible from the success fees.
This question never fails to come up and it always somehow amuses us. From our standpoint, it is similar to a doctor being asked: “Have you ever treated an engineer?” Of course, a past industry experience can initially help but every company is unique and every industry is evolving. Industry searches must be redone and updated just as medical exams. It is more important to know which exams to prescribe and how to properly analyse them.
Similarly for our clients, it is more important for them to be assured that we perfectly know our trade rather than theirs. In any event, we always make the effort of developing a good understanding of the stakes and the trends in industries, of the client company’s particular environment and of the goals of management. This is what we mean by custom made services.