M&A Top Alliance

The various steps of the M&A process:



Mergers and Acquisitions (M&A)

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In German-speaking countries, the notion of M&A is normally divided into two sections, i.e. mergers (Fusionen) and acquisitions (Akquisitionen).

Mergers are associations of two or more companies to create a legal and economic unit.

Acquisitions are full incorporations of company units or whole companies by the buyer.

Mergers and acquisitions represent external corporate growth which is likely to result in a dramatic improvement of the company’s performance potential.


Company profile (Exposé, Sales Memorandum or Information Memorandum)

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Effectively presenting your company is at the heart of every exposé (i.e. Sales Memorandum or Information Memorandum). This enables interested parties to make decisions and place bids within a given time frame.

The main part of an exposé normally provides information concerning

  • associations and the shareholdings
  • executives, the second management level and personnel
  • locations of the headquarters and subsidiaries
  • products and the markets served
  • the competitive situation
  • purchase and production
  • marketing and sales
  • administration and IT


Supplementary information is comprised of basic figures showing the company’s operative profitability for the last three years as well as future performance prospects for the upcoming three years. Furthermore, any existing, audited and consolidated

  • balance sheets and
  • profit and loss accounts


which - among other things – adjusted without singular and holder-dependant items, provide insight into corporate efficiency. Additionally, they serve as a solid basis for further planning.

Needless to say, we carefully verify any information and data of an exposé within the scope of a due diligence analysis.


Anonymised Short Profile (Teaser)

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This anonymised short profile, or teaser, is an abridged version of the exposé containing only information available to the public, these are:

  • a description of the respective business area and its products
  • rounded off number of employees and financial figures
  • relevant transaction arguments (succession plan, etc.)


Every anonymised short profile is designed to descreetely approach potential interested parties

  • from the M&A Top Alliance large networks and
  • from the M&A Top Alliance company database


in order to find those persons who demonstrate serious interest in holding talks about transactions.


Buyers

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Strategic investors

Strategic buyers or industrial investors seek strategically-relevant target companies. Hereby, the following aspects are of importance and form the profile:

  • Criteria: Similar customer segments, production technologies and research and development priorites in order to optimise potentials for synergy and reconstruction
  • Aim: To improve performance potential and, as a result, to strengthen the market position
  • Approach: Takeover of the strategic management followed by operative integration into existing structures

Financial investors / Private Equity Houses

We clearly distinguish between private equity partners having either a strategic or purely financial interest. Strategic financial investors, also institutional investors, are normally geared to the same criteria as strategic investors and are also pursuing the same goals.

Investors with a purely financial interest seek value-increasing capital investments. Their acquisition criteria are as follows:

  • Criteria: Market leadership and organic growth
  • Aim: To reach an average annual yield of 25% and an average holding period of 5 years
  • Exit: After 5 years, repurchase shares by the partners or IPO (Initial Public Offering)

The private equity partner wants to participate in strategic decision-making processes at the board level only, contributing assets, networks, know-how and experience

Private Investors

In a Management-Buyin (MBI) the company is taken over by outside management or outside management supported by a private equity partner.

In a Management-Buyout (MBO) the operative (employed) management acquires the company. Combinations of both (BIMBO = Buyin Management Buyout) have proven to be successful as well.

In this context we also speak of business angles who support entrepreneurs on their way to self-employment or support company acquisitions by investing and contributing to their know-how and experience.


Sellers

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Horizontal Expansion

When companies operating in the same market join together, they can go beyond their current limits. In horizontal acquisitions, companies operating in the same market or same production stage are taken over in order to achieve economies of scale.

For both companies a horizontal acquisitions normally results in a better position in relation to suppliers and customers, which is an upside in negotiating better conditions for transactions.

Vertical companies

When companies at different stages on the value chain join together, we speak of vertical mergers. In a vertical acquisition the buyer and seller are active on the upstream and the downstream market. In other words, one is the supplier for the other. In such vertical amalgamations not only the involved companies benefit form higher revenue but also customers benefit from a low price.

Conglomerates (diagonal, lateral)

A conglomerate (diagonal or lateral) is the combination of two or more corporations engaged in entirely different businesses together into one corporate structure. The two companies involved in such an acquisition are different in their economic performance. Conglomerates are multi-industry companies. Their main advantage is diversification and thereby a reduction of risks.


Letter of Intent

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A letter of Intent (LoI) outlines an agreement between parties showing an interest in negotiations and concluding a contract.

LoIs are not binding, however, they contain binding agreements, such as non-disclosure agreements and a "stand-still" or "no-shop" provision promising exclusive rights to negotiate.


Due Diligence

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In general‚ due diligence is a term used for a detailed and systematic analysis of all the data and information of your target company. The aim of this evaluation is to gain insight into the main factors influencing the target company’s business and performance. The target company prepares for the due diligence process by collecting all data and the data room index in a data room (a meeting room in the company) and by enacting data room rules.

The bidder prepares the due diligence template and sets up a team to conduct the evaluation. The due diligence template is a to-do list to check all details, contracts, documents, etc. which are essential for the evaluation and analysis.


Closing and Signing

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As soon as all contracts are through the final stages of negotiation, they get signed, which is then followed by the closing of the transaction.

With their signatures, the parties are legally bound. In the closing process the transfer is accomplished.