M&A Consulting – That stands for Mergers and Acquisition Consulting. What exactly is M&A consulting? The duties that M&A consultants are varied. M&A consultant are crucial to an advisory nature to businesses. The area of M&A and consequently that of M&A consultants is wide. This covers as well acquisitions of companies, debt and equity-financed mergers spin-offs and carve-outs or collaborations between firms. Our experts can explain exactly what the purposes and duties of an M&A consultancy are and the best way to make the most benefit from the M&A deal. In addition, the process and the most popular tasks you will need to perform in this sector are discussed in greater depth.
1. Intro to M&A Consulting
M&A consultants support clients with every operational and strategic step in connection with the (potential) shift in their client’s company resulting from a merger, acquisition joint venture, takeover or IPO. In the current era of growing public markets’ M&A business and open IPOs, M&A consulting gained importance and now accounts for a significant portion of consulting services provided by the top consulting firms (e.g., Bain with the focus on work with PE funds and transactional advisory arm of Big 4 firms, M&A consulting boutiques).
The aim for M&A consultancy is providing a comprehensive strategy for portfolio management to ensure growth and profitability for the business of the client. This includes a variety of consulting services. M&A consultants assist buyers in the search of most suitable merger or takeover candidates, design complicated divestiture or spin-off plans, assess the potential target’s business and pinpoint synergies that could be realized by pursuing M&A. They also assist transactions in the calculation of the purchase slide, and manage the other steps of the process, which include post-merger integration (PMI). Furthermore, M&A consultancies support the seller’s side by seeking investors and buyers (e.g. as part of an exit strategy of owners or an investments fund) and ensuring a smooth and fair finalization of the deal on behalf of the vendor.
2. What is it that makes M&A Deals a Success?
In order to create an M&A deal a success, it is not only an abundance of know-how but also an enormous amount of knowledge. It is essential to think beyond the individual numbers. M&A consultants aid their clients to comprehend the context behind the numbers and link them to international investors, experts in the field or other businesses around the world including takeover targets to maximize the value of the transaction. This is particularly important when dealing with complex arrangements (e.g. joint ventures, joint ventures) and other situations that require the greatest demand (fire sales) while also ensuring the security of the entire procedure.
It is vital to remember that the success of a transaction usually depends on the amount of stakeholder involved by the consultancy aspect. There is a constant need for deep, specialist understanding of areas ranging from business administration, tax law, to commercial law and finance. It is not unusual to find investment bankers as well as multiple legal and consulting firms to be involved in one transaction.
Additionally an effective M&A deal needs to be mediated between buyers and seller. M&A consultants often provide significant value-added element in negotiations by providing assistance to their clients on the most important arguments that should be discussed in the discussions between the two parties. A business does not purchase or sell its own assets!
3. M&A Process and Role of Consultants
There are some aspects of a common M&A transaction that could be handled with M&A consultants:
M&A strategy
Market screening & outside-in deep dives
M&A process includes. due diligence, negotiation and the closing of the transaction
Post-merger integration (PMI)
In the first place, consulting firms participate in the analysis possible strategic possibilities (incl. M&A) in the growth or exit strategy of the company. A M&A strategy is the ideal choice for a company based on the present market conditions and the firm’s specific circumstances. M&A opportunities (both buyers and sellers) is selected only when the buyer can benefit in terms of operationally, financial strategically, and operationally, while in addition to taking into consideration the risk associated with the transaction that is about to take place.
Then, if M&A is selected to help with the company’s expansion or to exit then the process of screening markets begins. Consultants comb through databases both private and public to find the most suitable buyers, investors as well as sellers (depending on the type of transaction) which will meet the goals of the client. Companies that are selected for evaluation are evaluated outside-in by consultants who conduct thorough analysis of the business model and the position in the market of those firms, and also to perform initial sizing of synergies potential from publicly available data. Following this process, the shortlisted companies are invited to participate with this M&A process. Discussions between interested parties will be scheduled only for companies who have signed a non-disclosure agreement.
This is the time when the M&A process begins. A typical component of the procedure for M&A advisors is due diligence, which is an in-depth study of the company. In the M&A procedure, there may be a variety of due diligence initiatives including financial, legal commercial, vendor, or due diligence. Based on the investment hypothesis of the core, they seek to identify the most important red and yellow warnings about the investment and also aid in the valuation process in order to determine the transaction’s price. Different scenarios for the company’s value are examined and evaluated because potential cash flows will be one of the main factor in the final price, as the sustainability of the company and future earnings is the main incentive for buyers. The value of the company is usually higher than that of assets within the company which include software or hardware as they are the sole way to generate economic value. The primary distinctions of pricing offered by the different parties depend on the expected return on investment and synergies attainable through M&A.
Then negotiations between the parties are held and upon an agreed-upon price and timeframe M&A is completed. M&A consultants are frequently involved in these processes by offering mediation services to avoid a possible blockage. After a successful closing of the transaction after the merger, the process of integration commences. The process of bringing two companies together (buyer or seller) is usually a difficult and delicate job like medical surgery or the process of a transplant. Both companies typically have distinct operating systems and cultures. PMI seeks to bridge the gaps between the two companies and to standardize their operations to allow value capture for buyers. Additionally the post-merger integration process is a goal that is ambitious in creating synergies that were discovered during the due diligence process, and ensuring simultaneously an operationally ready company.
To summarise, the activity of M&A consultants essentially consists of the search for potential investors/buyers/sellers and advising its clients through the process of negotiations. This is accompanied by maintaining a high degree of discretion and confidentiality to ensure that there is no disruption caused from external influences, or to avoid any financial loss to those involved. This is the reason M&A consultants are frequently being employed for corporate customers to make the process running smoothly and reduce the chance of failure.
4. M&A Consulting Services Core M&A Consulting Services
As we have discussed previously, M&A consultants provide support in every step of an M&A process. They can assist in carve-outs and searches for companies to target valuation of companies and capital structure optimization identifying refinancing levers and the management of stakeholder relations. Each of these components can be divided into specific elements of the consulting services offered by companies.
4.1 M&A Strategy
Blueprint examines M&A as a method to reach long-term strategic goals and the identification of sectors and areas that have the highest added value for the company, and the value chain associated together with the economics that underlie it.
4.2 Valuation
The determination of a valuation range by leveraging different valuation techniques (such such as e.g. discounting cash flow) and the comparison of publicly traded businesses or similar deals (e.g. by using sales and EBITDA multipliers).
4.3 Financial and Debt Advisory
The evaluation of the capability to service debt, as well as assessment of capital structure and liquidity could also cover the optimization of capital expenditures and the identification of refinancing levers derived from different sources.
4.4 Company Sales (Inclusive due diligence by the vendor)
The preparation of the deal involves examination of the situation of the company as well as the selection and evaluation of potential bidders, the development of an appealing equity story and final negotiations on binding and indicative bids.
4.5 Companies Acquisition (Inclusive Legal, Financial as well as Commercial Due Diligence)
The definition of the requirements in regards to the goals and the process, as well as support for searches and target valuation (incl. due diligence procedure) as well as support during negotiations and M&A closing.
4.6 Distressed M&A
The use of restructuring levers to create an independent turnaround business plan for distressed assets that includes. swaps with creditors to restructure debt. This is followed by the follow-up of the sale to an investor outside the company or a strategic buyer.
4.7 Post-Merger Integration
Support for operational issues to address the most crucial success factors for the merger, and to mitigate risk (such for e.g. misaligned management team, conflicts of culture or slow process disrupting business and customers, and the lack of rigor for value creation) This process involves planning and managing integration (PMO) and value capture and the operating model and change in culture.
5. Others M&A Consulting Services
M&A consultants are typically involved in more complicated projects that require complex configurations to their customers. This includes IPOs or separations, alliances and joint ventures.
In the first place, IPOs, or, in other words, public offerings require a lot of preparation by the business which wants to get listed. M&A consultants help companies go public in a variety of ways:
In formulating and communicating a persuasive strategy to increase the value
The development of plans for the public market, and determining the most appropriate IPO time and format
The preparation for entry into the financial markets (including IPO project management, business plans valuations, financing strategies document listing, road-show and analyst presentations)
Capabilities that are needed to ensure long-term financial success in the capital markets
Second, separations are typically needed due to legal and strategic motives. Diversifications of specific areas of the business are usually complex and different from M&A and integration procedures. M&A consultants can speed up and handle the process smoothly by helping with the definition of a divestiture strategy (incl. reviewing the portfolio and creating an equity store for the acquisition) and carve-out management (incl. the NewCo process design as well as management) and then finally, the ability to facilitate transactions.
Finally, M&A consultants support clients in defining the strategic basis for alliances and in locating the best partners. Then, they assist in the establishment of an alliance (JV) or an alliance conformity with goals and goals. In order to structure a partnership, consultants are required to help with the legal governance and operating model definition and monitoring over the long term. Less than 25% of JVs succeed in achieving all of their initial goals and nearly 70% face challenges within the initial three years.
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