At some point, natural growth of every business reaches its limits, and acquisitions become necessary to fulfil more ambitious growth goals. Looking for suitable acquisitions and negotiating potential deals is a delicate, time-consuming process, but thankfully, an experienced transaction consultant can make it much more efficient. Keep reading to learn how we can help grow your business.
Who are transaction consultants and what do they do?
Whether you represent a large international group or an ambitious Czech company, regardless of whether you want to grow on the local market or expand beyond its borders, the process leading to a successful business acquisition usually follows the same pattern. Being familiar with the market and the ability to spot a suitable company, approach it the right way, perform a deep analysis and negotiate a good deal are key to success. But to do all that, you need a specific type of expertise and experience. Most investors lack that, or they simply don’t have the capacity to dive into another big project. And that’s where consultants come in.
Seasoned consultants work with expert teams in M&A consulting, due diligence, appraisal, financial modelling, financing, and law to ensure best results. By hiring a consultant, you can rest assured that potential risks, like damaged reputation or unfavourable deal conditions, will be avoided, so you can focus on running your business instead of handling the acquisition by yourself.
Did you know that consultants don’t get the bulk of their fee until after a deal is closed, bearing all transaction-related risks? No successful deal, no fee from you.
Buying with consultants – how does it work?
Stage 0 – finding suitable businesses
- 2-3 weeks
To acquire a business, you first need to identify attractive companies and perform a basic analysis of each of them. Using their knowledge and experience, consultants will create what we call a long list – a list of suitable companies matching the client’s requirements. After the long list is approved and a strategy is chosen, your consultants will reach out to individual businesses, probing to see if they would be willing to discuss a potential transaction. For companies abroad, a consultant may use their network of colleagues from foreign consulting firms and have them reach out to companies in their countries.
- A long list is created
- Long-listed businesses are approached with an offer to discuss their acquisition
A consultant can hide the investor’s identity, so the representatives of a company you want to buy can be more open to share their strategy, not knowing that they are talking with a competitor, a customer, or a supplier. This method also protects you, the investor, from revealing your strategic plans.
- 2-3 weeks
After investigating potential interest of long-listed companies and evaluating available information, your consultants will help you create a shortlist of companies who expressed interest in further talks and who match your acquisition strategy and your goals. Next, you can start preparing for first meetings with your direct involvement.
- A shortlist is created
- First contact is established/first meetings are held
2. Non-binding offers
- 4-5 weeks
After analysing investment opportunities, your consultants will help you choose the most promising businesses for further talks. Most often, they will advise you to focus on one company at a time to gain as much information as possible and have it appraised so you can then make a non-binding offer. An experienced consultant will arrange a smooth, efficient exchange of information and prepare the appraisal and the offer that will protect your interests.
- Potential acquisition is appraised
- A non-binding offer to purchase the business is made
3. Due diligence
- 6-7 weeks
When the business owner accepts your offer, a due diligence will be performed as the next step, auditing the company from financial, legal, and tax perspective. This will help you make sure that the price you offered is appropriate given the state of the business, reveal potential issues and minimize risks. Due diligence is a crucial step, often very taxing for both parties in terms of time and mental toll. At this stage, you will truly appreciate the work of your consultant who will coordinate teams performing the audits and help you evaluate their findings.
- Due diligence reports are created
Did you know that consultants bear real responsibility for their due diligence conclusions? They will take on a contractual obligation to provide a reliable evaluation and agree to be responsible for damages in case of any shortcomings.
4. Binding offers
- 2-3 weeks
If the business is being sold in a tender with multiple participants, your consultants will help you prepare and submit a binding offer that reflects the findings of the due diligence and explains your conditions for moving forward with the purchase. Individual conditions will be negotiated simultaneously with the submission of the binding offer.
However, if it’s just you and the business owner and the talks are smooth, you can skip this stage and move on to talk about contracts and other related contractual documentation.
- Final, binding offer is made
- Financial aspects of the purchase of shares / stock / part of the manufacturing are negotiated
5. Closing the deal
- 4-5 weeks
The last stage of the process is all about transaction documents. Agreements will be drafted by legal advisors of either party, followed by several rounds of negotiations. While the agreements are always written by lawyers, someone with a perfect knowledge of broader commercial and financial context, like a transaction expert, must always be a part of these talks. In case of big deals, talks usually happen on several different levels, with entire teams of both parties involved. At this stage, your consultants will help you see which conditions are acceptable and which are unfavourable for you.
After contractual conditions are agreed, contracts are signed, transaction is settled, and ownership rights are transferred. These steps can happen simultaneously, but often you will need to receive the approval from the local office for protection of competition or meet certain criteria before you can proceed with the settlement.
- Support and preparation are provided for negotiations
- Financial aspects of transaction documentation are reviewed
Let us help you
At KPMG, we are ready to help at any moment; we can guide you through the entire process right from the start or jump in at a later stage. Most of our fee is paid after the sale is finalized, and if a deal falls through, you keep our fee. However, our team of experienced transaction consultants, lawyers, tax advisors and financial experts will do all in their power to help you close the best deal.
Let’s talk and see how we can help you!