If you “look behind the curtains” of our work, you can see the daily painstaking work. How complicated is the M&A process? To answer this question, it is necessary to understand better the essence of our work. Every day we work on preparing investment documents (teaser, information memorandum, financial model), hold many meetings, negotiations, write and reply to hundreds of e-mails, analyze and look for interesting goals, respond to letters of interest (Letter of Intent, LOI) organize and conduct a comprehensive due diligence (DD) of companies, prescribe the basic terms of the transaction (Term Sheet), structure them, participate in the development of transaction documents (Shareholder ‘Agreement, Share Purchase Agreement , SPA etc.). Each project that ends with a transaction is like a small life that we live with our customers.
This service implies that our client wants to find a partner to sell a part of the company or the whole company. Usually, when creating a profile to search for such a partner, we must answer several important questions. Which partner is needed and why? Conventionally, it is possible to divide all potential partners into two categories — a financial partner and a strategic partner. Private equity funds can be financial partners. Such funds are primarily interested in rapidly growing companies and they are interested in «entering» the share capital in order to earn money quickly (horizon of 5-7 years). Money is one of the greatest values of financial partners. If the tasks are more global, for example, we need security, new sales markets, technologies and so on, then for this role we need a strategic partner.
The algorithm for advising the sell side can be briefly described like this:
To assess and understand the seriousness and complexity of this process, it is necessary to participate in it. Those who countered M&A transactions at least once, do not go into such a process without an M&A adviser in the future. It is very difficult to understand all the features, see all the hidden moments and even imagine how much time will be needed to close the deal. The shortest transaction in our practice lasted 6 months. Usually, during the “normal” course of the entire process, transactions are closed within 1 year. It is possible and necessary to control the speed of the transaction process and we have our own know-how in this area.
In our practice, the consulting service for the acquirer is much less common. However, each mandate is an amazing process of finding goals (targets) around the world. Most often, our customers clearly know in which country and with which characteristics they want to find their targets. Studying the market of different countries on different continents, as a rule, we work together with our local colleagues in the region we need. Now we are able to seek targets for acquisition effectively in 60 countries. Our geography, as well as our capabilities, is constantly growing and expanding. However, this does not mean that we are not looking for a target directly. Our customers most often look for targets for quick entry into the market or to increase market share in a particular region. The essence of acquisitions is saving time for solving problems in business. We were lucky that none of our clients made hostile acquisition.
The consulting service for the acquirer includes the following:
An important component of any investment process is a package of investment documents. The standard package includes 3 documents. All documents are prepared in English, but, if necessary, in addition, a version in Russian is made.
Teaser — a short presentation about the company. Here you can find such data as the number of staff, revenue, growth rate and so on. Usually the teaser does not contain the company name. This is because when a potential partner receives information, he cannot understand which company it is in this document. M&A transactions are a very delicate process and all parties understand that the transaction may not take place. But the data that is provided in a larger volume may cause unpleasant consequences or even losses. The teaser volume is 2-3 pages.
Investment Memorandum (IM) — the maximum big presentation about the company. It is an official document that the company submits to potential partners upon request in order to convey to them the goals, all kinds of risks, as well as the conditions and rules by which the investment round is supposed to be held. An investment memorandum is provided only after the signing of a Non-Disclosure Agreement (NDA). It contains financial data, information about the company’s management, its owners, etc. Such information is necessary in order to form an objective idea of the future of the business, potential risks and benefits, financial aspects. The volume of the investment memorandum is 50 — 100 pages.
Financial model — a document developed in Excel format in order to assess the economic and investment components of a business. The financial model provides all the necessary calculations, indicates the volume of the company’s assets, personnel data, company’s funds data, financial indicators and so on. In the model you can always find information about the future of the company (forecast indicators) and the return period of investment funds. Often a model is formed according to several scenarios (for example, pessimistic, realistic, optimistic). The results of the financial model are partially included in the investment memorandum.
The better the investment documents are prepared, the more chances there are to impress the potential partners and start negotiations with them.
