M&A as an option for medium-sized companies

Diversification as a motivation for financial investors

For fi­nan­cial in­ves­tors, it is not only the re­gu­larly pur­sued buy and build ap­proach that cur­rently plays an im­port­ant role. In the cur­rent mar­ket en­viron­ment, it is also a mat­ter of port­fo­lio di­ver­si­fi­ca­tion.

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On the one hand, the fo­cus can be on smal­ler com­pa­nies, so-cal­led small (up to 50 mil­lion eu­ros in sa­les) and mid-cap tran­sac­tions (from 50 to 250 mil­lion eu­ros in sa­les). In these ca­te­go­ries, M&A pro­jects con­ti­nue to take place - so­me­ti­mes in highly com­pe­ti­tive bid­ding pro­ces­ses. Va­lua­ti­ons for pro­fi­ta­ble, as­set-light and cash-flow strong busi­ness mo­dels are at­trac­tive for sel­lers. For the po­ten­tial in­ves­tor, howe­ver, this me­ans that the due di­li­gence pro­cess must in­clude a de­tai­led fi­nan­cial ana­ly­ses as well as all va­lua­tion-re­le­vant in­flu­en­cing fac­tors (in par­ti­cu­lar ad­just­ments to earnings, net fi­nan­cial debt and the de­ter­mi­na­tion of sus­tai­nable working ca­pi­tal). In ad­di­tion, it may be us­eful to in­clude own growth as­sump­ti­ons in the ad­jus­ted busi­ness plan. In ex­clu­sive, non-com­pe­ti­tive tran­sac­tions, this is of­ten done with the in­vol­ve­ment of the cur­rent ma­nage­ment and a joint plan is agreed upon.

On the other hand, di­ver­si­fi­ca­tion may be di­rec­ted towards a new in­dus­try. In this case, fi­nan­cial in­ves­tors in­cre­asin­gly par­ti­ci­pate in in­itial an­chor in­vest­ments. These in turn form the nu­cleus for the forth­com­ing im­ple­men­ta­tion of the clas­sic buy and build stra­tegy.

Current interest rate environment counterproductive for large-cap deals

In the cur­rent in­te­rest rate en­viron­ment, fe­wer large-cap deals are ta­king place. In­stead, fi­nan­cial in­ves­tors are using the op­por­tu­nity to set up new funds and thus raise new in­vest­ment ca­pi­tal. Last but not least, re­turns on equity tran­sac­tions con­ti­nue to be re­gu­larly hig­her than in tra­di­tio­nal in­vest­ments - and the fi­nan­ciers are aware of this. With the avail­able ca­pi­tal, all-equity tran­sac­tions can then also be re­pre­sen­ted in­iti­ally. In ad­di­tion to tran­sac­tion se­cu­rity, this also ac­ce­le­ra­tes the clo­sing of the tran­sac­tion, shor­te­ning the time bet­ween si­gning (purchase agree­ment si­gning) and clo­sing (eco­no­mic trans­fer and purchase price pay­ment) - an ad­van­tage for the sel­ler. It also gi­ves the new ow­ners and the fi­nan­cial ser­vice pro­vi­ders time to find the best so­lu­tion for fi­nan­cing the ac­qui­si­tion.

Corporate Transaction: The Decision-Making Process must mature

What does this mean for you as a cor­po­rate de­ci­sion-ma­ker? Are you thin­king stra­te­gi­cally about dis­po­sing of a com­pany, parts of a com­pany, or in­di­vi­dual lo­ca­ti­ons, or about gro­wing in­or­ga­ni­cally th­rough an ac­qui­si­tion, or ex­pan­ding your va­lue chain? Or could struc­tu­ring a com­pany suc­ces­sion be a pos­si­ble re­ason to in­itiate an M&A sa­les pro­cess?

All this can also be a lon­ger-term pro­cess and does not have to mean an im­me­diate and com­plete se­pa­ra­tion from the com­pany. Af­ter all, you want to hand it over into good hands.

Ex­pe­ri­ence shows that in many ca­ses, po­ten­tial in­ves­tors can be found who would like to con­ti­nue the en­tre­pre­neur’s life's work and are en­thu­si­as­tic about the en­tre­pre­neu­rial va­lues that have been built up - of­ten over ge­ne­ra­ti­ons. In­itial dis­cus­sions - of­ten be­fore the ac­tual M&A pro­cess has even be­gun - fo­cus ex­clu­si­vely on get­ting to know each other per­so­nally and on a con­fi­den­tial ex­change bet­ween de­ci­sion-ma­kers.

Capacity and experience as bottleneck factors

In our close and trust­ful dis­cus­sions with share­hol­ders or the ma­na­ging di­rec­tors, we of­ten hear that the com­pany does not have the ca­pa­city or know­ledge to handle a com­plex and per­haps also pro­trac­ted M&A pro­ject. This is where we come in! With our in­te­gra­ted, fo­cu­sed and mid-mar­ket ori­en­ted con­sul­ting ap­proach, we ex­amine each tran­sac­tion pro­cess from dif­fe­rent per­spec­tives. With our new RSM net­work, cross-bor­der tran­sac­tions are even ea­sier to im­ple­ment.

Comprehensive transaction consulting from all perspectives

The tran­sac­tion teams at RSM Eb­ner Stolz sup­port you th­roug­hout the ent­ire M&A pro­cess -on both the buyer and the sel­ler side - and, as usual, of­fer you ad­vice from a sin­gle source. For ex­am­ple, our ma­nage­ment con­sul­tants will ma­nage the ent­ire M&A tran­sac­tion for you in the course of a sale pro­cess and will work with you to find the best pos­si­ble in­ves­tor for your com­pany. In ad­di­tion, our Tran­sac­tion Ad­vi­sory Ser­vices (TAS) team will pre­pare the ne­cessary fi­nan­cial in­for­ma­tion of the com­pany or part of the com­pany to be sold, ana­lyze it and pro­vide the data in a Fi­nan­cial Fact Book (FFB) sui­ta­ble for in­ves­tors. In ad­di­tion, our tax and le­gal teams can ad­vise on the tax op­ti­miza­tion or le­gal struc­tu­ring of the tran­sac­tion. This helps to avoid so-cal­led deal brea­kers la­ter in the pro­cess that can si­gni­fi­cantly pro­long the tran­sac­tion. This in­te­gra­ted view from all di­sci­plines ma­xi­mi­zes the speed and cer­tainty of the tran­sac­tion and, ul­ti­mately, also the sa­les pro­ceeds for your com­pany.

Whether sell-side or buy-side - we provide comprehensive advice!

In ad­di­tion to sell-side pro­jects, we also ad­vise you on po­ten­tial ac­qui­si­ti­ons (buy-side). Here, too, our ex­pe­ri­en­ced M&A, fi­nan­cial, tax and le­gal teams are at your dis­po­sal. Please do not he­si­tate to con­tact us. There is al­ways a sui­ta­ble and fle­xi­ble so­lu­tion - also for your com­pany.

Note: Eb­ner Stolz will host a webi­nar on cur­rent trends and de­ve­lop­ments in M&A and TAS on 07.11.2023. More in­for­ma­tion soon at www.eb­ner­stolz.de