Transactions Blog

Lead advisors are often placed in the role of ‘bad cop’ when pushing the deal through for the seller and getting the highest price possible for the business. But what is the best way to work with a lead advisor and in what ways can they add the most value in a transaction process?

Planning before the sales process even starts is essential to allow the setting of strategic and financial objectives as well as getting an idea as to the internal resources available for the transaction process. One of the key messages from Kris Geysels, CFO of Aviapartner, in his presentation at the M&A Academy was that lead advisors will not take any of the preparation work away from the internal team.

Selecting a lead advisor should be part of the planning and preparation phase for management and key to the selection process should be the credibility of the firm, their knowledge of the market and value drivers, their knowledge of the potential buyers and any eventual contacts with same, a good ‘connection’ with the internal team they will be working with throughout the process and of course, the fees they will charge for services. The selection process can also give a good indication for the valuation – there will be a range of valuations performed on the business by each corporate finance house asked to tender for the work.

Ideally, the mandated lead advisor should contribute speed and focus to the process to keep things moving along once all the preparation and planning is in place. They should also have analysed the potential buyers and be of assistance in driving the buyers to the potential synergies that exist through their knowledge of the market and value drivers. A concise information memorandum summarising this market knowledge and outlining the potential synergies should also be the key document prepared with the lead advisor but close attention is to be paid to ensure any financial information mentioned will be consistent with any vendor reporting or dataroom information to be made available to buyers at a later stage.

If you have to refinance debt in the coming months, this advice might help you

http://www.pwc.co.uk/eng/issues/tackling_finance_costs.html

Our German practice issued a new publication on the Private Equity Investments in the Automotive Supplier Industry.

It describes how the automotive industry has been hit hard in 2008 with a decline in global GDP growth leading to a decline in its business prospects, uncertainty about the direction the industry will take and the drying up of credit facilities, as confirmed in recent evolutions. As in other industries, investment activity has come to a halt and the industry suffered a substantial loss of shareholder value.

In addition, the automotive industry is going through significant changes itself including, among other things, the increasing importance of emerging markets, the emergence of low-cost and smaller cars, the increased emphasis on reduced resource consumption, improving vehicle safety and raising passenger comfort; and improving value chain efficiency.

Potential investors in the automotive sector however can still be positive about the longer-term view in the industry when credit facilities become available again and provided that:

·          the investment case is based on a solid foundation of profitable goal and an optimal cost structure

·          emphasis on selecting a target that is well-positioned to capture the future industry trends

·          financing can be secured based on a realistic business plan – both equity and debt providers must believe in the stability of the financial model. This includes confirming assumptions through rigorous due diligence both from a financial, commercial and operational perspective

·          there is a speedy execution of key post-deal improvement projects and regular strategic and operational reviews to avoid surprises at the time of exit as well as ensuring a high quality management team is on board for the full period of ownership

The detailed study provides further insight in the evolution of the automotive supplier industry and can be found on the PwC publication page: Private equity investments in the automotive supplier industry.