An acquisition that comes out of nowhere can be the deal of the century, but to take advantage of such an opportunity requires extensive and strategic business experience. We take a look at the key aspects of how a transaction advisor can provide effective professional assistance in an intended sale or an unexpected acquisition. Whatever the reason, selling a business is a big decision - not just emotionally, but also financially and professionally. That's why it makes a difference how and with whom you do it.
In our work, we often meet business owners who do not feel the need to talk to a transaction advisor because they already have a serious buyer for their business. So they think they no longer need an advisor, even though experience shows that such one-on-one transaction processes often fall through. Even when the business owner has already invested a lot of time and energy in the process, in many cases even providing commercially sensitive information to the prospective buyer.
Why is a transaction advisor important?
Practice also shows that while the majority of sellers are facing their first such transaction, most buyers come into this situation with considerable experience. This creates an imbalance of power, which is further tilted towards the acquirer by sending a dedicated and committed M&A team to negotiate: this creates a situation where the prospective buyer takes control of the negotiations and is easily able to assert its interests.
The seller can avoid this by sitting down at the negotiating table with a strong team, such as a transaction adviser, as this will improve his or her bargaining position. Cooperation pays off in the process - it is not a necessary cost, but a great investment. A well-prepared expert will not only help you with the technicalities of the process, but will also ensure that the seller has a real understanding of the market value of your company, its opportunities and risks - in other words, that you make the best possible informed decision.
Inevitable financial due diligence and company valuation
Buyers typically make decisions based on concrete numbers and risks, rather than on faith in the future. To do this, however, the seller needs to be aware of the data that can be used to credibly present the company. Accurate and thoughtful due diligence is a key part of the process. This is where transaction advice adds real value: it identifies weaknesses, identifies strengths and helps prepare an information memorandum that presents the company's operations, performance and prospects in a clear and convincing way.
When valuing a company, we do not just rely on accounting data. The future business plan, market trends, management competence, and synergies that are attractive to customers are all incorporated into the financial model. Carefully prepared financial modelling will not only help you to assess the sale price, but will also lay the foundations for successful negotiations.
Uneven conditions
It is not uncommon for a prospective buyer to be negotiating with several targets at the same time in order to choose the best option. In contrast, the seller has by default only one offer to compare, often with nothing to compare it with, leading to another information imbalance.
The involvement of an M&A advisor is also justified in this situation, as their knowledge of the transactions and the market will bring the business owner closer to making the best decision.
Why not start alone?
Many people would start the process of selling a business intuitively, for example, based on the interest of a friend or competitor. Although this may seem obvious at first, it is important to bear in mind that this type of negotiation often does not produce the best results. Indeed, corporate finance considerations go beyond a simple agreement. A business transaction is only truly successful if the whole process has been thought through and all parties have the same goal in mind. This is where a transaction advisor can help: to support the seller not only up to the point of signing the contract, but also after its completion.
In which situations is advice particularly important?
The external perspective is particularly important in the case of generational change, where succession within the family is not resolved or a new partner is expected to join. Because of the ownership involvement, it is often difficult to objectively assess the situation and future of the company. In this situation, an independent expert can not only advise, but also help to prepare a feasibility study and develop realistic scenarios.
But advice is equally important if the owner decides not to sell the business completely, but only to bring in a partial investor. In this case, financial modelling, valuation and due diligence are needed in the same way - but with different considerations. But the basic objective remains the same: to make the best possible long-term decision.
And if the company is not in perfect shape?
Many people think that only well-performing companies can be sold, but the practice is quite different: in many cases, the buyer sees the fantasy in the transformation. The role of the transaction advisor is crucial here too, as restructuring opportunities need to be assessed. A well thought-out business plan and a credible financial model can lead to a higher value than the current one, if the potential buyer sees the potential for growth.
In summary
Selling a business is not a one-off decision, but a series of interdependent steps where timing, strategy and being as well informed as possible are key. A well-prepared process can not only result in a higher sale price, but also reduces the scope for error and ensures that the seller can hand over the business with real peace of mind. The M&A advisor can bring this added value by seeking the best possible terms throughout the entire sale process, while managing all the details of a highly complex transaction. Because selling a company is not just a financial issue, it is also an emotional one.
If transaction advice, then Moore Hungary
In our fast-changing world, Moore provides strategic guidance and practical advice to help clients navigate and understand the complex regulatory and changing market environment and industry conditions, and thereby find the best solutions.
Moore Global, which started in a London office more than 110 years ago, is now one of the world's leading consulting and audit networks. Its services will be directly available in the domestic market from March 2021. With a team of 180 experts, Moore Hungary offers a full range of consultancy services in the fields of financial, business, tax and accounting advice, auditing and hotel management.
If you want to know how much your company is really worth, what the potential of your current business model is, or simply whether it's worth getting started now, contact the experienced consultants at Moore Hungary.
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