Plenary session: “The Role of Support Services in the Business Transfer Process”Services in the Business Transfer Process

14.15-15.30, 19 May, 2009

Jean Marie Catabelle President CRA (FRANCE)Jean-Marie Catabelle, President, CRA (FRANCE)

Christopher Kummer, President, The Institute of Mergers, Acquisitions and Alliances (IMAA) (SWITZERLAND- AUSTRIA)and Alliances (IMAA) (SWITZERLAND AUSTRIA)

Jean-Pierre Di Bartolomeo, Chairman of the Board of Directors, Sowaccess (BELGIUM)

Laurent Weerts, Managing Director, Institut de l'Entreprise Familiale (Family Business Institute), Partner, Deloitte (BELGIUM)

Yannick Hoche, Expert in business transfer, Agence pour la Création d’Entreprises (APCE) (FRANCE)

Lex Van Teeffelen, Programmanager Consultancy - Researchleader Business Transfers, Hogeschool Utrecht, Knowlegde Center Innovation in Business, Faculty of Economics and Management (THE NETHERLANDS), y g ( )

Plenary session: “The Role of Support Services in the Business Transfer Process”Services in the Business Transfer Process

14.15-15.30, 19 May, 2009

Keynote speech by Christopher Kummer, President, The Institute f M A i iti d Alli (IMAA) of Mergers, Acquisitions and Alliances (IMAA)

(SWITZERLAND- AUSTRIA)

The Role of Support Services in the Business Transfer Processthe Business Transfer Process

Adj. Prof. Dr. Christopher KKummer

ContentsContents

The E opean Ma ket of SME Me ge s • The European Market of SME Mergers & Acquisitions

• A holistic view on the M&A Process• The complexity in deal situations –The complexity in deal situations

The different types of advisors and their rolestheir roles

• The challenges of giving and taking d i i SME d ladvice in SME deals

THE EUROPEAN MARKETTHE EUROPEAN MARKETOF SME MERGERS & OF SME MERGERS &

ACQUISITIONS

Mergers & Acquisitions by European SME as Acquiror

800

1000

10 000

12.000

14.000

UR)

400

600

6.000

8.000

10.000

e (in

 bil. EU

Num

ber

0

200

0

2.000

4.000

Value

199519961997199819992000200120022003200420052006200720082009*2009f

N b V l1995-2008:• 120,000 deals with• 5,400 bil. EUR

* 2009 as of 16 May 2009; Source: Thomson Financial, IMAA analysis

Number Value

This year in comparison to 2008:• number of deals: -25%• value of deals: -55%.

Mergers & Acquisitions by European SME as Acquiror

70.00080.00090.000100.000

800

1.000

1.200

EUR)

30.00040.00050.00060.00070.000

400

600

800

ue (in mil. 

Num

ber

010.00020.000

0

200

Ja M M Ju Se N Ja M M

Valu

an 08

Mar 08

May 08

ul 08

ep 08

Nov 08

an 09

Mar 09

May 09f

Number Value

* as of 16 May 2009; Source: Thomson Financial, IMAA analysis

This May in comparison to May 2008:• number of deals: -35%

Number Value

• value of deals: -72%.

A HOLISTIC VIEW ON THEA HOLISTIC VIEW ON THEM&A PROCESSM&A PROCESS

A Holistic View on the Mergers & Acquisitions process

Corporate Identification Evaluation

Due Diligence

Negotiationsand Closing

Strategy of Targets Evaluation

Integration

THE COMPLEXITY IN DEAL THE COMPLEXITY IN DEAL SITUATIONS –SITUATIONS

THE DIFFERENT TYPES OF ADVISORS AND THEIR

ROLESROLES

M&A process: Advisors can be described in terms of their roles, tasks or their type of firm

1

Role• e.g. financial, legal, accounting,

tax

1

Role

1

Task• e.g. preparation of information

memorandum communication with

2

Advisors23 Type

memorandum, communication with transaction partners

3

TaskType

23 Type• e.g. investment bank, accounting

firm, law firm, in-house department, management consultant

3

M&A process: The number and type of advisors involved depends mainly on the complexity of the involved depends mainly on the complexity of the

transaction

T i l l i b id M&A it ti

Financial advisorL l d i

Typical roles in a buy-side M&A situation

• Value, price• Transaction structure• Financing

Project

Legal advisor• Due diligence• Transaction

structure Project management• Coordination• Communication

• Legal documentation

• Competition law Potential purchaser

Accounting & tax Strategic advisor• Market analysis

purchaser(Principal)

Senior advisor• Target identification• Contacts• Intelligence gathering

gadvisor• Due diligence• Tax structuring

• Target identification

• Synergies

• Intelligence gathering

M&A process: The number and type of advisors involved depends mainly on the complexity of the involved depends mainly on the complexity of the

transaction

T i l l i ll id M&A it tiFinancial advisor• Value, price• Transaction structure

Typical roles in a sell-side M&A situation

Legal advisor • Transaction structure• Selling documents

Project t

Legal advisor• Vendor due

diligence• Transaction

structure management• Coordination• Communication

Seller

structure• Legal

documentation• Competition law

Accounting & tax advisor

Strategic advisor• Separation issues

(Principal)

Senior advisor• Buyer identification• Contacts• Intelligence gathering

advisor• Vendor due

diligence• Tax structuring

• Separation issues• Buyer

identification

• Intelligence gathering

M&A process:Key tasks of a financial advisor (1)

I t t b k ti fi t lt t t

Value, price Preparation and/or analysis of financial projections

Investment bank, accounting firm, management consultant, corporate development dept.

Value, price • Preparation and/or analysis of financial projections• Company valuation• Advice on capital markets environment• Tactical advice on pricing• Negotiation (or negotiation assistance)

Transaction structure

• Communication of price (e.g. offer document, fairness opinion, board documents)

• Evaluation of alternative solutions to M&A• Scope of the transaction

T f t ti ( i ff ti i t l t d l h d l)• Type of transaction (e.g. spin-off, auction, private sale; asset deal, share deal)• Type and timing of consideration (cash, shares; earn-out)• Definition of a reference point for price during the negotiations• Advice on key commercial and contractual terms

Fi i Financing / use of proceeds

• Access to the financial markets• Coordination of external financing• Optimizing the financing structure• Currency hedging• Investment of proceeds• Investment of proceeds

M&A process:

Investment bank accounting firm management consultant corporate

Key tasks of a financial advisor (2)

Selling • Gathering of information on the target

Investment bank, accounting firm, management consultant, corporate development dept.

Selling documents

Gathering of information on the target• Preparation of selling documents (teaser, information memorandum)• Preparation of management presentation• Briefing of target management for Q&A sessions

M&A process:Key tasks of a project manager

I t t b k t lt t t d l t

Coordinati • Coordination of all parties on the side of the principal

Investment bank, management consultant, corporate development department

Coordination

Coordination of all parties on the side of the principal• Project planning and management• Management of documents and deliverables• Coordination of dataroom and management presentation• Contact management

Communi-cation

• Hand-over to Post Merger Integration team

• Communication to boards and shareholders (investor relations)• Communication with transaction partner(s)• Communication with regulators• Communication with regulators• Communication with management and employees• PR

M&A process:Key tasks of an accounting & tax advisor

A ti fi t fi

(Vendor) • Accounting, commercial and tax due diligence

Accounting firm, tax firm

(Vendor) Due diligence

Accounting, commercial and tax due diligence– Dataroom proceedings– Q&A with transaction partner(s)– Preparation and/or analysis of financial projections

• Audit of financial statements if required and practicable

Tax structuring

• Documentation (e.g. bid document, merger report)

• Optimization of one-off tax effects• Optimization of ongoing tax structure

– Tools: e g domicile of transaction partners asset vs share deal cash – Tools: e.g. domicile of transaction partners, asset vs. share deal, cash vs. stock, timing, price level, purchase price allocation, accounting regime

M&A process:Key tasks of a senior advisor

Target / • Identification of potential targets and acquirers through network of

(Former) board member, "Elder Statesman", independent consultant

Target / buyer identification

Identification of potential targets and acquirers through network of contacts

• Assessment of willingness to make a deal• Assessment of impediments to making a deal (e.g. strategic and financial

status)

Contacts • Access to key decision makers at the potential transaction partner(s)• Access to key regulatory decision makers• Clear showing of commitment to a transaction partner• Clear showing of commitment to a transaction partner

I t lli Up to date kno ledge abo t the M&A ma ket incl ding competing selle s Intelligence gathering

• Up-to-date knowledge about the M&A market, including competing sellers and acquirers

• Knowledge of the current status of an M&A process beyond the official routes

• Assessment of the position of regulators towards a transaction• Assessment of the position of regulators towards a transaction

M&A process:Key tasks of a strategic advisor

Market • In-depth knowledge of market size, market participants and key trends

Management consultant, industry consultant, market research firm

Market analysis

In depth knowledge of market size, market participants and key trends• Market side input for business plan / valuation• Input for strategic rationale of the transaction• Input for key criteria for target or buyer selection• Assessment of supplier, customer and competitor reaction

Synergies • Identification, quantification and timing of synergies and dissynergies• Identification of key implementation risks• Hand-over to post merger integration team• Hand-over to post merger integration team• Execution of post merger integration

S ti Identification of s itable candidates fo di estit eSeparation issues

• Identification of suitable candidates for divestiture• Managing the consequences of a partial divestiture

M&A process:Key tasks of a legal advisor

L fi l l d t t(Vendor) due diligence

• Legal due diligence (incl. contracts, litigation, labor, environmental, property, insurance IP)– Dataroom proceedings

Q&A ith t ti t ( )

Law firm, legal department

diligence

Legal

– Q&A with transaction partner(s)• Identification of key risks• Implications for contract negotiations

• Confidentiality agreementsLegal docu-mentation

• Corporate documentation (e.g. board minutes, corporate actions, setting up NewCos)

• Capital markets documentation (e.g. announcements, prospectuses, filings)

• Contracts (e g sale and purchase agreement financing auxiliary • Contracts (e.g. sale and purchase agreement, financing, auxiliary agreements)

• Regulatory filings• Archiving and ongoing legal relationship (e.g. monitoring of warranties)

C titi • Assessment of merger control implications and filing requirement for the Competition law

Assessment of merger control implications and filing requirement for the potential buyers, for a potential buyer and for competing buyers

• Assessment of timing of merger control processes in various jurisdictions• Management of merger control applications (documentation,

communication, arguments)• Mitigation of adverse impacts

M&A process: Depending on the exact type of transaction other consultants may be needed for transaction, other consultants may be needed for

certain tasks

• IT consultants• Environmental consultantsEnvironmental consultants• HR consultants

b k• Insurance brokers• Surveyors / property consultantsy / p p y• Public relations, investor relations and

PR consultantsPR consultants• Corporate intelligence bureaus

THE CHALLENGES OF THE CHALLENGES OF GIVING AND TAKING GIVING AND TAKING

ADVICE IN SME DEALS

Some Challenges in SME DealsSome Challenges in SME Deals

1) Knowledge about M&A and management capacity

2) People: Founders, owners, …

3) Timing: Too late, too slow or right?

4) Th l f bli t t d l4) The role of public structures and players

5) Risks: Relative importance of M&A investment and deal success

6) Deal structuring vs. financing

7) The quality of advisors and advice in SME deals7) The quality of advisors and advice in SME deals

8) The split of work around M&A