M&A Consulting – That stands for Mergers and Acquisition Consulting. What are you doing in M&A consulting? The responsibilities that the M&A consultant are of an advisory nature to businesses. The industry of M&A and, consequently, the field of M&A consultants is vast. This covers among others, acquisitions by companies, debt and mergers that are equity-financed spin-offs, carve-outs or collaborations between firms. Our experts will explain what the purposes and duties are and the best way to make the most value from the M&A deal. In addition, the process and the most commonly used tasks you will need to perform in this sector are discussed in greater in detail.
1. Intro to M&A Consulting
M&A consultants aid clients in every operational and strategic step in connection with the (potential) change in the client’s business that results from an acquisition, merger, joint venture, takeover or IPO. In the current era of growing public markets’ M&A business and open IPOs, M&A consulting gained prominence and is now responsible for a significant portion of consulting services provided by the top consulting firms (e.g., Bain with its primary focus on working with PE funds as well as the transactional advisory divisions of Big 4 firms, M&A consulting boutiques).
The purpose for M&A consultation is to offer a comprehensive strategy for portfolio management that will ensure success and growth for the business of the client. This includes a broad range of consulting services. M&A consultants aid buyers in their search for best merger or acquisition candidates, design complex divestiture or spinoff plans, analyze the potential target’s business and pinpoint synergies that could be realized through potential M&A. Additionally, they aid transactions by calculating an acquisition slide and take care of every step in the process which include post-merger integration (PMI). Furthermore, M&A consultancies support the buyer side by looking for investors and buyers (e.g. as part of an exit strategy of owners or an the investment fund) in addition to ensuring a smooth and fair closing of the deal to the buyer.
2. What makes M&A Deals Successful?
In order to ensure that an M&A deal a success, it is a need for not just the most extensive know-how but also an enormous amount of knowledge. It is crucial to think beyond the individual numbers. M&A consultants aid their clients to comprehend the context behind the numbers and link them to world-class industry experts, investors and other corporations around the world – which includes takeover targets – to maximize the value of the transaction. This is crucially important in the event of complicated arrangements (e.g. joint ventures, joint ventures) and other situations that require the greatest demand (fire sales) and ensuring the privacy of the entire procedure.
It is crucial to note that the success of a transaction usually depends on the amount of stakeholder involved by the consultancy aspect. There is usually a requirement for deep, specialist expertise in areas that range from business administration to tax law, commercial law and finance. It is not unusual to find investment bankers as well as multiple companies, including law and consultancy firms, to participate in a single deal.
Additionally to that, a successful M&A deal demands a proper mediation between buyers and seller. M&A consultants typically provide valuable asset in negotiations, providing advice to their clients on the most important arguments that should be discussed in meetings between the two parties. A business does not purchase or sell its own assets!
3. M&A Process and Role of Consultants
There are several aspects of an normal M&A transaction that may be handled through M&A consultants:
Market screening & outside-in deep dives
M&A procedure includes. due diligence and negotiations and the closing of the transaction
Post-merger integration (PMI)
First, consultancies participate in the analysis possible strategic possibilities (incl. M&A) to help with the growth or exit strategy of the business. A M&A strategy is the best choice for your business based on the current economic environment and the company’s particular circumstances. M&A possibility (both buyers and sellers) is only considered in the event that the company can gain in terms of operationally, financial strategically, and operationally, while in addition to taking into consideration the risk associated with the proposed transaction.
Then, if M&A is selected to help with the company’s expansion or to exit The process of screening markets begins. Consultants comb through the databases of both public and private sources to find the most suitable buyers, investors and sellers (depending on the kind of transaction) that can meet the goals of the client. The companies that are shortlisted are then evaluated externally – consultants conduct more thorough analyses of the business model and the position in the market of those firms, and also to determine the initial size of synergies that could be a possibility using publicly available information. Following this process, the shortlisted companies are invited to participate to this M&A process. The meetings with the interested party will be scheduled only for companies who have signed a non-disclosure agreement.
This is the time when the M&A process begins. A typical part of the process used by M&A advisors is due diligence, which is thorough study of the company. In the M&A procedure, there may be a variety of due diligence tasks like financial, legal commercial, or vendor due diligence. Based on the investment hypothesis of the core, they are designed to discover the most important red and yellow warnings about the investment and aid the valuation process in order to determine the price of the proposed transaction. The various scenarios that could affect the company’s value are examined and evaluated because potential cash flows will be the primary factor in the final price since the sustainability of the company and future profits is the primary factor that buyers are looking for. The value of the company is usually higher than that of the company’s assets which include software or hardware as they are the sole means to create economic value. The most important distinctions in the price offered to various parties are based on the expected return on investment and synergies attainable through M&A.
Then negotiations between the parties are held and upon the agreement of a price and timeline M&A is completed. M&A consultants are usually involved in these processes by offering mediation services to avoid a possible stoppage. After a successful closing of the transaction the post-merger integration process begins. The process of bringing two companies together (buyer or seller) is typically a complicated and delicate process similar to medical procedures or an organ transplant. The two companies often have different operating systems and cultures. PMI is designed to bridge these gap and standardize the businesses to allow value capture for buyers. In addition PMI has the goal of creating synergies that were discovered in the commercial due diligence process, and ensuring that there is operational readiness for the acquiring company.
To summarise, the activity of M&A consultants essentially consists of the search for potential investors/buyers/sellers and advising its clients through the process of negotiations. This is accompanied by maintaining a high level of discretion and confidentiality in order to prevent any disruption from external influences, or to avoid financial losses to the parties involved. This is the reason M&A consultants are becoming frequently being employed for corporate customers to make the process running smoothly and reduce the possibility of it failing.
4. The Core M&A Consulting Services
As mentioned earlier, an M&A consultancy provides support in every step of an M&A process. They can assist in carve-outs and searches for companies to target valuation of the company and capital structure optimization identifying refinancing levers and the management of stakeholder relations. These elements can be separated into specific components of the consulting services offered by companies.
4.1 M&A Strategy
Blueprint examines M&A as a way to reach long-term strategic goals and the identification of sectors and activities that provide the greatest benefit to the business and the value chain associated together with the economics that underlie it.
The determination of a valuation range using a variety of valuation techniques (such such as e.g. discounting cash flow) and also the comparison of publicly traded businesses or similar deals (e.g. by using sales as well as EBITDA multipliers).
4.3 Financial and Debt Advisory
Evaluation of the capacity to pay off debts, including evaluation of capital structure and liquidity could also cover the optimization of capital expenditures and the identification of refinancing levers derived from other sources.
4.4 Company Sales (Inclusive of Vendor Due Diligence)
The preparation of the deal involves an analysis of the company’s position as well as the selection and evaluation of potential bidders, the development of an appealing equity story and the final negotiation of the indicative and binding bids.
4.5 Companies Acquisition (Inclusive Legal, Financial, and commercial due diligence)
The definition of the requirements in regards to the goals and process, assistance in the search and valuation of targets (incl. due diligence procedure) as well as support during negotiations and M&A closing.
4.6 Distressed M&A
The use of restructuring levers to create an independent business case for turnaround for distressed assets that includes. the exchange of debt with creditors in order to help restructure debt, with the follow-up of selling the assets to an outside investor or a strategic buyer.
4.7 Post-Merger Integration
Support for operational issues to address the most crucial success factors for the merger and reduce risks (such such as e.g. an unaligned management team, cultural conflict or slow process disruption to customers and business, a insufficient value-creation rigor) The process involves planning and managing integration (PMO) and value capture and changing the operating model and culture.
5. Others M&A Consulting Services
M&A consultants are typically involved in more complex projects, with challenging configurations on behalf of their client. This includes IPOs and separations, as well as alliances and joint ventures.
First of all, IPOs or more precisely, public offerings require a lot of preparation by the business which wants to get listed. M&A consultants assist companies in going publicly in various ways:
In formulating and communicating a persuasive strategy to increase the value
Making methods for public markets, and determining the most appropriate IPO date and the best structure
The preparation for entry into the financial markets (including IPO project management, business plans valuations, financing strategies document listing, road-show and analyst presentations)
The development of capabilities is essential for long-term financial success in the capital markets
Separations are also often necessary due to regulatory and strategic motives. The divestitures of certain areas of the business are usually complicated and are comparable to M&A and integration procedures. M&A consultants can speed up and handle the process smoothly by helping with the development of a divestiture plan (incl. reviewing the portfolio and creating an equity store to facilitate the transaction) and carve-out management (incl. the NewCo process design as well as management) as well as the ability to facilitate transactions.
Finally, M&A consultants support clients in defining the strategic basis for alliances and in locating the best partners. They also assist in the formation of an alliance (JV) or an alliance accordance with the desired goals and goals. The process of structuring a partnership requires consultants to help with the legal governance and governance set-up as well as operating model design and monitoring over the long term. A mere 25% of JVs meet all their goals when they first start and more than 70% face challenges within the initial three years.
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