Mergers & Acquisitions

How to buy a company –

step by step(incl. MIZ services)

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Motives

• From the seller‘s POV:– Focusing upon core competences

– Outsourcing of divisions

– Synergic effects

– Covering capital requirements

– A desired re-orientation

– No succession plan

– Advanced age

– Impaired health

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Motives

• From the buyer’s POV:– Synergic effects

– Development of new markets

– Acquisition of know-how

– Acquisition of human capital

– A wider range of products/services

– Capital investment

– MBO

– Taking over competitors

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Variants

• Share deal– Acquisition of shares

• Asset deal– Assignment of assets

• Properties and buildings• Regular customers, machines, stocks of

merchandise etc.

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Stages (seller‘s)

(1) Partner‘s/owner‘s decision to sell

(2) Authorisation of consultants

(3) Consultants run a performance analysis; what asking price?

(4) Looking for a suitable buyer via brokers, networks, media, successor exchanges (e.g. www.nexxt.org)

(5) Buyer and seller enter into a non-disclosure agreement

(6) Exploratory talks

(7) Letter of intent

(8) Due diligence

(9) Contract negotiations

(10) Closing of the contract of sale

(11) Handover to buyer

(12) Perhaps closing of a consultancy contract

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Stages (buyer‘s)

(1) Commissioning a transaction consultant- Asking price appropriate?

- Offer sincere?

- A brief analysis of the company

- Checking financing options:Equity vs. outside financing

- Consulting banks re financing

- Time expenditure: 2 days

- Costs: ca. €2,000**Costs depend upon consultant‘s qualification. Our hourly rates:

• CPA / tax consultant: 275 €/h• Lawyer / tax consultant: 220 €/h• Tax consultant / partner: 200 €/h• Tax consultant: 140 €/h• Qualified staff: 100 €/h

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Stages (buyer's)

(2) Starting negotiations- Drafting a letter of intent

- A “soft” LOI:- Non-committal

- General phrasing

- Time expenditure: 1 day at max:

- Costs: ca. €1,800

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Stages (buyer's)

(2) Starting negotiations- A “hard” LOI:

- Specific agreements

- Legally binding declarations

- Reference to integral parts of the contract

- Non-disclosure obligation

- Time expenditure: 2 days

- Costs: ca. €3,500

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Stages (buyer's)

(3) Due diligence- Legal, business and technical analysis of the

company prior to the closing of the contract of sale

- The buyer‘s detailed consideration

- Data room

- Time expenditure: dependent upon the company’s size and structure, 5 – 10 days

- Costs: ca. €10,000 – 20,000

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Stages (buyer's)

(4) Form of contract- Drafting the contract of sale

- Buyer/seller coordination

- Cooperation with an experienced lawyer: a specialist in commercial and company law

- Time expenditure and costs: dependent upon the company‘s size and structure and the resultant complexity of the contract of sale (ca. €10,000 - 30,000)

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Stages (buyer's)

(5) Signing- Suggesting a notary for the notary act

- Accompanying the closing of the contract

(6) Closing- Monitoring the implementation of the purchase

- Payment- Appointment of the new management- Dismissal of the former management- Delegation of authorities

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Stages (buyer's)

• Financing– Asking for offers

– Negotiation of the terms

– What leverage?

Financing negotiations with banks are concurrent with the other steps

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Why can buying a company fail?

• No clear acquisition target

• Companies are too disparate (in terms of their culture)

• Too high a price

• Synergic effects overestimated

• Costs underestimated

• Acquired company‘s potential misjudged

• Market pattern misjudged

• Wrong implementation

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Why consultants?

• Buying or selling a company is not part of one’s day-to-day business

• Speed

• Expertise

• Experience gained in many a project

• A discreet outreach possible

• Coordination of involved specialists

• A realistic purchase price

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Why MIZ?

• An extensive network– Banks

– Lawyers

– Notaries

• Experience in processing M&As

• Consultancy/support out of one hand– Buying the company

– Accounting consultancy

– Tax consultancy

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Other MIZ services

• Ongoing tax consultancy

• Accounting consultancy

• Auditing

• Work in advisory councils

• Assumption of directorships

• Representation of partners vis-a-vis other partners

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Contact

MIZ GmbH Steuerberatungsgesellschaft

WIR TEUHAND GmbH Wirtschaftsprüfungsgesellschaft

Im Teelbruch 5545219 EssenTel.: 02054 / 928 – 01Fax: 02054 / 928 – 100essen@miz.de

Grunerstraße 13340239 DüsseldorfTel.: 0211 / 5381 93 - 0Fax: 0211 / 5381 93 - 99duesseldorf@miz.de

Röntgenring 3-540878 RatingenTel.: 02102 / 9929 – 0Fax: 02102 / 9929 – 31ratingen@miz.de

Kirchhellener Straße 26946145 OberhausenTel.: 0208 / 64844 – 0Fax: 0208 / 64844 – 48oberhausen@miz.de

www.miz.de