M&A Process: we accompany you competently in mergers & acquisitions

The company sale strategy is determined at the beginning of a transaction process. A consistent strategy is critical to the success of the transaction. The key areas of the sales strategy include the following elements:

• Development of the equity story, outlining the strengths of the company, its products, organisation and management, the market and growth potentials, as well as the potential synergies of a corporate acquisition
• Consolidation of all operational issues into an integrated financial model to make the equity story plausible
• Coordination of the transaction structure and process while developing a detailed timetable outlining all steps until transaction closing
• Definition of the buyer groups to be addressed and those to be excluded
• Determination of the enterprise value, making purchase price expectations plausible and to classifying incoming offers from potentially interested parties

A clear company sale strategy ensures the success of the transaction.

The basis of a successful M&A transaction is a detailed analysis of the company's historical development and future growth potential. As part of the preparation of the historical financial figures, special effects that increase or decrease future earnings (like special effects due to the existing shareholder structure, increased costs due to the previous financing strategy or operational one-off effects) are identified and adjusted for. Turnover and significant expense items are backed with a detailed price-quantity framework to increase transparency. The business plan is put to a test for the next three to five years based on planning assumptions, the market environment and the management’s expectations. Our aim is to provide a transparent presentation of your company's operational earning power and thus ensure the success of the transaction.

The transaction documents will be the most valuable resource that tells your story After signing a non-disclosure agreement (NDA) and presenting the company in a personal meeting or phone call, prospective buyers are provided with a more detailed company presentation - the information memorandum. The information memorandum is the key document provided to potential buyers so that they can assess your business. The key sections in the memorandum include 

• a summary of the equity story
• the transaction structure
• the company's business model
• an overview of products, services and customers 
• an overview of the organisation, management, and employees
• growth prospects and strategy
• market overview and development
• historical financial data
• financial and business plan to forecast the future development of the company

NETWORK, together with youand the management, will develop a concise and comprehensive presentation of your company, which includes:

• the positioning of your business and clear differentiation of your company from its competitors, the differentiation of your company’s unique selling points
• the presentation of the scalability of the business model and the overall growth profile
• the identification of trends, developments, and sustainable growth areas
• a comprehensive outline of historical and future investments in growth

The information memorandum is the central source of information that is used for receiving the initial non-binding offer from a prospective buyer. NETWORK will review all non-binding initial offers received and the from these available options, prospective buyers who will take the next steps (extended access to company data and confidential information) are jointly selected. These next steps usually are employed by conducting management meetings and a more comprehensive due diligence.. 

Within an M&A process, the due diligence plays a central role. Here the potential buyer is given the opportunity to conduct a comprehensive analysis of the legal, financial, tax and other situation of the target company. The aim of due diligence is to identify the risks and opportunities as well as the key value drivers of the business. Different areas of due diligence are employed at different stages of an M&A process. For example, due diligence can be carried out by the buyer during the verification phase, alternatively it can also be initiated by the seller in before the transaction begins (so-called vendor due diligence) or finally carried out for confirmation (so-called confirmative due diligence). 

Due diligence is carried out with the help of a data room, which makes all relevant information available to the potential company buyer. Nowadays, the data room is set up and controlled electronically. In the data room, the company data and transactions are compiled comprehensively and prepared in a structured manner according to its respective areas:

• Finance 
• Law 
• Taxes 
• Environment
• IP / patent protection
• Purchasing / suppliers
• Customer structure
• Products / services
• Market / competition
• Social / governmental

While company documents are reviewed, personal management presentations are usually employed in parallel, which are combined with a company site visit. Unanswered due diligence questions are answered during Q&A telephone/video conferences and via the data room.

In the context of an M&A process, the so-called management presentation is usually the first official meeting between a potential buyer and the management of the target company. Management presentations are intended to spark enthusiasm on the buyer’s side and provide personal insight into the company. NETWORK accompanies and moderates these highly interactive meetings. The management presentation offers the potential buyer the opportunity to ask specific questions and to get a picture of the current management, the company premises and its location.

NETWORK prepares the management presentation together with the client and ensures that the key people are optimally prepared for these intense meetings.

The content of the management presentation is usually similar to that of the information memorandum, but has individual focal points: 

• Introduction of the management
• History of the company 
• Equity story - reasons for the acquisition
• Overview of market and competition
• Strengths of the business model and future growth prospects
• Profitability - update on current business performance
• Cooperation and synergy potential between buyer and target company
• Future role of the management
• Transaction structure

For buyers, the corporate cultural fit is usually an important issue: corporate culture and employees must match. This is a particularly critical aspect of a successful M&A transaction. Therefore, a buyer needs to check cultural compatibility and get to know the people behind the target company. In addition, a buyer can get to know the seller in a face-to-face conversation and ascertain motivations and concerns and thus adjust his final offer in a targeted manner to the specific contract negotiations. 

The SPA (share purchase agreement) sets out the terms on which the shares in a company are transferred to the buyer. Company risks identified during due diligence can be mitigated or eliminated by guarantees, warranties, or exclusions in the SPA. The exact content of a purchase agreement depends on the complexity of the transaction. However, there are certain contract points that are found in almost every SPA:

• Subject matter of the contract: This is where the exact subject matter of the sale (company shares, other) of the transaction is listed
• Purchase price: This is where the individual price components and the methods of payment are specified
• Closing Conditions: These are conditions and required actions that must be fulfilled and completed before the shares can be transferred
• Guarantees, indemnities and undertakings deal with the mitigation or assumption of certain risks (e.g. non-competition clauses, tax clauses, right of withdrawal)
• other obligations of the parties (e.g. supplementary performance)

NETWORK is involved throughout the contract negotiations as well as in the drafting and final agreement of the contract details and documents. We work hand in hand with clients and specialised legal advisors from our network who have many years of experience in M&A transactions and with whom we have built up a longstanding relationship of trust.

As a rule, the sale of shares in a company or the purchase of a company must be notarised. However, there is often a time lag between the notarial signing and the actual closing of the share and purchase contract. The signing of the company purchase agreement is the first step towards the transfer of the assets or company shares. However, the legal execution usually only takes place when contractually agreed conditions are fulfilled. Common closing conditions include:

• Approval of a merger by the Federal Cartel Office
• Divestment of assets that are not part of the transaction 
• Obtaining waivers of change-of-control clauses in key agreements