Transactions Blog

• 30Jun

  How to integrate the Notional Interest Deduction (NID) in a business plan

  by: Frederic Van Hoorebeke
  News No Comments

  The Belgian tax law enables companies to deduct a fictitious interest calculated on the basis of their shareholder’s equity, the so called notional interest deduction (NID). This measure reduces the cost disadvantage of equity in the capital structure of Belgian businesses and effectively lowers the corporate income tax rate.

  The applicable NID rate is determined every year, based on the average return on the secondary market of a Belgian government bond with a remaining maturity of 10 years (OLO10).

  Business plan practitioners may be confronted with the question which NID rate to use, especially in long term forecasts? The current NID rate is known, but what within 5 or 30 years? Making an accurate estimate for every year during the thirty years to come is practically impossible, so a thirty year average might be an easy-to-use alternative.

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  Tags: business plan, interest, NID, notional, OLO, rate, valuation

• 11Jun

  Sourcing M&A opportunities in China

  by: Benjamin Ye
  News No Comments

  With the global economy recovering, foreign strategic buyers are re-emerging the surface of the Chinese M&A market and are actively looking for expansionary acquisitions. Entering the Chinese M&A environment is however challenging due to:

  • Industry structure and geographic scale
  • Constant changing regulatory environment
  • People versus systems
  • Partners and alliances
  • Compliance costs
  • Potential traps on financial & tax information
  • Proper structuring
  • Intellectual property environment

   Although the global economic recovery will entice foreign strategic buyers to look for Chinese investment opportunities, all parties involved are notably more selective in their investments and will look beyond the valuations in order to identify fundamentally sound companies. Absent local presence sourcing good quality deals in a highly fragmented and widespread market requires a combination of in-depth local knowledge and an integrated local network. Moreover the ability to implement operational efficiencies can be dictated by the quality of the relationship with management and is often constrained by minority interests.

  PricewaterhouseCoopers China – in close cooperation with the business development team and the Transactions practice of PricewaterhouseCoopers Belgium – can assist in this process of sourcing the attractive investment opportunities and to perform due diligence procedures to determine the optimal governance and operational structure post closing.

  Tags: China, M&A opportunities

• 06May

  Press release – “Post-Merger Integration Survey 2009″ results

  by: Sophie Van Durme
  News No Comments

  For FR version, scroll down.

  Bijna 4 op 10 bedrijven onderschatten integratiekosten na fusie of overname

   

  Economische crisis noodzaakt efficiënter management van fusiekosten en -processen

  Brussel, 5 mei 2010 – Onder druk van de economische crisis is het realiseren van de juiste synergieën en het optimaliseren van de rentabiliteit van cruciaal belang voor het succes van een overname. Een goede planning en efficiënt kostenbeheer van de fusie- en integratieprocessen na een bedrijfsovername spelen hierbij een doorslaggevende rol. Toch start 1 op 3 bedrijven de planning van het integratieproces te laat, pas na het afsluiten van de transactie. Bovendien overschrijdt 39% van de bedrijven bij een overname de geplande integratiekosten. Een meerderheid van de respondenten (62%) geeft de voorkeur aan een snellere integratie om zo kosten te besparen en onzekerheid weg te nemen.

  Dit blijkt uit het onderzoeksrapport van PricewaterhouseCoopers over fusie- en integratieprocessen na een bedrijfsovername. Het rapport bundelt de resultaten van bevragingen uitgevoerd in 2009, in acht Europese landen, waaronder België, bij meer dan 250 topmanagers die bij een integratieproces volgend op een bedrijfsovername betrokken waren gedurende de laatste drie jaren. 

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  Tags: PMI, Post-deal, post-deal services, post-merger integration

• 03May

  M&A Academy: “HR Integration after a merger, a practical example”

  by: Sophie Van Durme
  Events, News, Presentation No Comments

  The 7^th and last session of this year’s M&A Academy cycle took place on 29 April looking at “HR integration after a merger”. Turbulent economic times are making many organisations undertake a transaction, whether a merger, an acquisition, a divestiture, a carve-out or a spin-off. Every transaction creates turmoil, uncertainty and opportunities for people.

  Peter De Bley, Partner at PwC Belgium, introduced the subject before handing over to our guest speaker, Wim De Wit, HR Director, retail & private banking Belgium, BNP Paribas Fortis, who presented his views on the strategic added value of HR in times of changes and the future challenges for his company.

  Download the presentation: “HR integration after a merger”

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  Tags: HR integration, M&A, mergers & acquisitions

• 26Apr

  “Real Option” valuation or when will “standard” valuation methods lead to sub-optimal or wrong decisions? – Part II – How

  by: Philippe Rasquin
  News No Comments

  When confronted with a situation where the “standard” NPV is inappropriate (see article – Part I), one should first identify all the value drivers and the key elements of the business plan for which uncertainty is high. It should then identify all the options for which it has either to mitigate these uncertainties or to react upon their resolution: the option to postpone the investment, to downsize production capacity, to close down capacity, to exit, to increase capacity, to transform itself into another business, etc.

  The difficulty in this process is to find the relevant options, the ones bringing value to the project – the ones for which undertaking a real option valuation approach will be worthwhile.

  The fact that management can stop a research project whenever the results of a test are negative, that uncertainty about the success of a research programme is high and that the NPV of such a programme is close to zero clearly indicates that a real option valuation approach should be used. The three conditions discussed in the previous article are met. Starting research on a chemical formula today is effectively an option that gives the right to make pre-clinical trials in a few years. These pre-clinical trials are nothing else but a further option giving the right, if they are successful, to make clinical trials. The clinical trials in turn provide yet another option to invest in a production process if they turn out to be positive. Today, valuing research programmes as a portfolio of compounded options is the best way to estimate the real value of an R&D programme.

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  Tags: Option, valuation

• 12Apr

  “Real Option” valuation or when will “standard” valuation methods lead to sub-optimal or wrong decisions? – Part I – Why and When

  by: Philippe Rasquin
  News No Comments

  How should a firm and its management evidence its decision to invest in a company, in new equipment, in new projects, in new markets? Most of us have learned at some point in our education that such a decision should be based on financial analysis, looking at the payback period, at the internal rate of return or better, at the Net Present Value of the project. We have been taught that we should invest if the Net Present Value (NPV) of the project is positive. Yet many readers will agree with me that in “real life”, projects with a “high” internal rate of return happen to be postponed and that for “strategic reasons”, projects happen to be undertaken when their NPV is negative. And, after all, sometimes these decisions appear to have been the good ones…

  So, are the decision tools we were provided with the right ones? Are we missing something? Should we forget NPV to assess our investments and rely on “strategy”, “vision” and “business flair” only?

  No ! Tools such as NPV were developed at a time when technology and market developments were evolving at a slower pace than at the beginning of the 21st century, at a time when uncertainties about future prices, sales volumes and regulations were lower than today. These tools have been useful and remain useful in many situations. In some circumstances, however, their use can lead to inappropriate decisions. The key issue for management is to identify when this might happen and in these cases to use better, more appropriate tools.

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  Tags: Investments, Option, valuations

• 02Mar

  Simplification of merger procedure

  by: Karin Winters
  News No Comments

  Since 25 January 2010, it is possible to carry out all types of mergers without the intervention of an independent expert (i.e. the company’s statutory auditor, or an auditor/external accountant if no statutory auditor has been appointed).

  Articles 695 and 708 of the Belgian Companies Code (“BCC”), modified following implementation of the European Directive 2007/63/EC, now provide that no independent expert’s report on the merger proposal is required, if all shareholders (and holders of other securities conferring the right to vote) of each of the companies involved in the merger, have so agreed.

  Prior to such modification of the BCC, it was only possible to carry out a so-called “parent-subsidiary merger” without the intervention of an independent expert (i.e. a merger whereby the acquiring company already held all shares of the acquired company).

  The report of the management bodies of the companies involved in the merger is however still required (articles 694 and 707). The new European Directive 2009/109/EC provides for the possibility to also abolish the requirement to draw up such report. For the time being however, this Directive has not yet been implemented in the BCC, and it is not yet clear whether the Belgian legislator will seize the opportunity to further reduce the burden of formalities for mergers.

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  Tags: auditor, companies code, demerger, European Directive, M&A, merger, merger procedure, mergers & acquisitions, report, restructuring

• 16Feb

  Will the family-owned businesses bring once again new oxygen to the M&A market?

  by: Didier De Smet
  News No Comments

  The recent financial turmoil in many ways might have affected family owned businesses. Be it through the exposure to further specific industry issues/downturn due to a lack of diversification of the family wealth or be it because the available financial reserves have suffered significantly, e.g. due to operational and/or financial losses incurred or working capital surges.

  In addition, the Trends Top 30.000 survey showed self-financing of companies in general at its lowest over the last 3 years (2008). While the reasons and sources thereof can be quite diverse (lower profits, more distribution or increased liabilities), self-financing might still be further hit by the effects of the economic crisis in 2009 (and …2010) and this at a moment of increased need of finance. Demand for financial resources is therefore likely to increase in the mid-term (even if funds are available within the company – cfr. Trends Top 30.000, ‘Loans to safeguard savings’ in 1 out of 4 companies).

  Any given family business therefore needs to ask itself the existential question on how to continue. Whether it is its ambition to do so on a fully stand-alone basis (and whether from a financial/wealth point of view it is capable to do so), whether (temporarily) a certain level of external capital is required or whether the family wants to sell its business. Even in the first scenario, it is highly likely (and recommended) that the family diversifies its activities and hence is likely to make divestments/acquisitions. Needless to say that in the other scenarios, family businesses are likely to bring new oxygen to the M&A market in the mid-term.

  Tags: family business, financing, M&A

• 15Jan

  Depressed European IPO markets show an upturn in last quarter, laying foundations for recovery in first half of 2010

  by: Peter Ujvari
  News, Publications No Comments

  On 8 January 2010, PwC has published the Q4 2009 IPO Watch Europe report. The IPO Watch Europe surveys all new primary market equity IPOs on Europe’s principal stock markets and market segments (including exchanges in Austria, Belgium, Denmark, France, Germany, Greece, Holland, Ireland, Italy, Luxembourg, Norway, Poland, Portugal, Spain, Sweden, Switzerland and the UK).

  Europe’s IPO markets recorded a distinct upturn in activity in the fourth quarter of 2009, with both value and volume rising markedly over the previous nine months when stock exchanges continued to suffer from the worldwide loss of confidence in the capital markets and the recession. However, pricing proved difficult in what remains a buyers market.

  There were 61 IPOs on European exchanges in the last quarter of 2009 with an offering value of €4,994m, compared with 44 listings that raised €1,375m in the previous quarter and the 64 IPOs with a value of €1,238m that were recorded in the final three months of 2008.

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  Tags: capital markets, IPO, stock exchange

• 11Jan

  Due diligence decreases fraud liability

  by: Jacqueline Gram
  News 4 Comments

  Recently the President of the Brussels Criminal Court judged that the investigation of KB Lux was not performed on valid terms. This decision again raises questions about how to tackle economic crime and how to deal with fraudsters. In a day-to-day business environment we are more inclined to take measures internally, which in light of the KB Lux decision appears to be a more effective method. In addition, companies are often confronted with questions when dealing with a new cooperation, joint venture, merger or acquisition. These situations call for a fraud due diligence in order to avoid the inheritance of fraud risks. Due diligence investigations often prove crucial in identifying fraud risks and detecting incidences of fraud outside the books and records.

  E.g. a purchaser who discovers post-deal that one of the sellers has defrauded or bribed vendors of the purchased company may be confronted with the fiscal, financial and legal consequences of such behaviour. A thorough pre-deal fraud due diligence might reveal such liabilities in many cases.

  Tags: due diligence, fraud, investigation

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