Why search for advisory in mergers and acquisitions?
In Brazil, the mergers and acquisitions market has shown a strong growth in the last years. In 2014, this business sector performed its best year in the country’s history. PwC data indicates that mergers and acquisitions disclosed transactions totaled more than US$ 108 billion in 879 deals, a number of deals 8.2% greater than 2013.
Along with the development of mergers and acquisitions activities, the interest of companies and investors in participating in these processes and their results has also grown in the last years.
The motivations for selling a company include: succession planning, different perceptions among partners, changes in strategic decisions, financial pressure, unexpected offers, need for capital or for a new structure for growth.
On the other hand, those who seek to buy shares or control of a company are generally motivated by: market consolidation, entry into a new sector, rapid growth through acquisitions, time-saving, use of their know-how in the segment, brand improvement and opportunities for value creation.
Despite the growing interest, the complexity of a purchasing or acquisition process also implicates in a series of barriers for those who want to participate as a buyer or seller. For example, the process can lack confidentiality and the acquisition or purchase of the company may have an auction behavior. In addition, the difficult access to investment funds and lack of know-how to present what they perceive as value can eliminate any chances of success right from the start. In the event of a negotiation with an investment fund, its large experience can have strong implications in the negotiated value. In addition, the company’s management team may be compromised, since it is a process that takes time and resources.
Thus, it is clear that both the buying and selling of a business are complex transactions that involve risks for which most managers and business owners are not prepared.
Hiring financial advisory specializing in mergers and acquisitions is necessary to achieve the intended result through a structured process guided by specialists.
Among others, the role of advisory on buying and selling processes involve an initial diagnosis of the company’s stage and the alignment with the objective of its partners, the development of market documents and of a realistic valuation and also assistance in the company’s preparation for the market, in the survey and approach of potential investors or target, support in structuring the transaction conditions and in the development and understanding of the purchase or sale agreement.
With the support of financial advisory, investors or targets can stay focused on activities related to the company throughout the entire process and still remain the holder of the last word, as the advisor may mediate some answers and protect its client. Therefore, the advisor is the one who contacts the targets while maintaining the confidentiality of the proceedings and leading the negotiation process.
Therefore, companies interested in being bought or sold, entirely or partially, shall evaluate their needs and seek appropriate advice for better development of the process and, therefore, get the best results within their market reality.
If you are interested in learning more about the peculiarities and challenges of the process, or wish to buy or sell a business, please contact A3 Capital.