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What is M&A Consulting?

M&A Consulting – That stands for Mergers and Acquisition Consulting. What is M&A consulting? The duties as M&A consultants are varied. M&A consultant are crucial to an advisory nature to businesses. The area of M&A and, consequently, the field of M&A consultants is vast. This covers among others, acquisitions of companies, debt and mergers that are equity-financed spin-offs, carve-outs or collaborations between businesses. Our experts will explain what the purposes and duties are and the best way to make the most benefit from any M&A deal. In addition, the process and the most commonly used services you can provide 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 an (potential) change in their client’s company resulting from a merger, acquisition joint venture, takeover or IPO. In the era of increasing public markets’ M&A activities and the open IPOs, M&A consulting gained importance and now accounts the majority of consulting services provided by top consulting firms (e.g., Bain with the focus on work with PE funds as well as the transactional advisory divisions of Big 4 firms, M&A consulting boutiques).

The aim for an M&A consultancy is providing a comprehensive strategy for portfolio management that will ensure growth and profitability for the business of the client. This includes a broad range of consulting services. M&A consultants aid buyers in the search of most suitable merger or takeover candidates, design complicated divestiture or spin-off plans, assess the potential target company and determine synergies that could be realized through potential M&A. Additionally, they aid transactions in the calculation of an acquisition slide and take care of the other steps of the process, which include post-merger integration (PMI). Additionally, M&A consultancies support the buyer side by looking for investors and buyers (e.g. as part of an exit strategy of owners or an investments fund) and ensuring a smooth and fair closing of the deal to the buyer.

2. What is it that makes M&A Deals a Success?

In order to create an M&A deal successful, it is a need for not just the most extensive expertise but also a huge amount of expertise. It is crucial to look beyond the specific numbers. M&A consultants assist their clients to comprehend the significance behind the numbers and link them to international investors, experts in the field and other corporations around the world – which includes takeover targets – in order to maximize the value that is created by the transaction. This is crucially important when dealing with complex arrangements (e.g. joint ventures, joint ventures) as well as special circumstances with the greatest need for speed (fire sales) and ensuring the privacy of the entire procedure.

It is crucial to note that the likelihood of a successful deal is contingent on the number of parties involved by the consultancy aspect. There is a constant need for a deep, specialized understanding of areas ranging from business administration to tax law, 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 to that, a successful M&A deal demands a proper mediation between buyers and seller. M&A consultants typically provide valuable asset in negotiations by providing assistance to their clients on important arguments to bring up in meetings 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 an common M&A transaction that could be handled through M&A consultants:

M&A strategy
Market screening & outside-in deep dives
M&A procedure includes. due diligence, negotiation and closing of the transaction
Post-merger integration (PMI)

In the first place, consulting firms participate in the evaluation possible strategic possibilities (incl. M&A) in the growth or exit strategy of the business. The M&A strategy is the ideal choice for a company based on the present market conditions and the firm’s specific circumstances. M&A possibility (both buyers and sellers) is selected only in the event that the company can gain from it operationally, financially strategically, and operationally, while in addition to weighing the risks associated with the proposed transaction.

If M&A is selected as a method for the company’s growth or for exit then the process of screening market participants begins. Consultants comb through databases both private and public to find the most suitable buyers, investors as well as sellers (depending on the kind of transaction) which will meet the company’s goals. Companies that are selected for evaluation are evaluated externally – consultants conduct more thorough analysis of the business model and the market position of these businesses, in addition to determine the initial size of synergies that could be a possibility from publicly available data. After this, the shortlisted companies are invited to participate to this M&A process. Discussions between interested parties will be scheduled only for those businesses who have signed a non-disclosure agreement.

This is the time when the M&A process begins. A typical component of the process used by M&A advisors is due diligence, which is an in-depth study of the company. In the M&A procedure, there may be different types of due diligence initiatives including financial, legal commercial, vendor, or due diligence. Based on investment assumptions, they are designed to discover the most important red and yellow warnings about the investment and aid the valuation process in order to determine the price of the proposed transaction. Different scenarios for the company’s value are evaluated and analyzed since the cash flow forecast for future is one of the main factor in the final price since the sustainability of the company and future earnings is the main factor that buyers are looking for. The value of the company is usually higher than that of assets within the company like software or hardware, since they are the sole means to create economic value. The primary distinctions of pricing offered by the different parties depend on the expected ROI and synergies that can be realized through M&A.

Then negotiations between the parties are conducted, and based on the agreement of a price and timeline M&A is completed. M&A consultants are usually involved in these processes by offering mediation services to avoid a possible stoppage. After a successful closing of the transaction after the merger, the process of integration begins. The process of bringing two companies together (buyer or seller) is typically a complicated and delicate job like medical surgery or the process of a transplant. Both companies typically have distinct operating systems and cultures. PMI is designed to bridge these gaps between the two companies and to standardize their operations in order to facilitate value capture for buyers. In addition the post-merger integration process is a goal that is ambitious in making synergies possible that were identified in the commercial due diligence process and to ensure 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 by external influences or any financial loss to those involved. This is the reason M&A consultants are becoming frequently being employed from corporate companies to make the process running smoothly and reduce the chance of failure.

4. The Core M&A Consulting Services

As we have discussed previously, M&A consultants provide support throughout each step of the M&A process. They can assist in carve-outs and searches for potential companies valuation of companies as well as capital structure optimization the identification of levers for refinancing, and management of stakeholder interests. Each of these components can be separated into specific components of consulting firms’ services.

4.1 M&A Strategy

Blueprint evaluates M&A as a way to meet long-term strategic objectives as well as the selection of target industries and activities that provide the greatest added value for the company, and the value chain that goes along with the economics behind it.

4.2 Valuation

Calculation of a final value range using a variety of valuation techniques (such such as e.g. discounting cash flow) and also the comparison of publicly traded businesses as well as similar transaction (e.g. by using sales and EBITDA multipliers).

4.3 Financial and Debt Advisory

Evaluation of the capacity to service debt, as well as assessment of capital structure and liquidity can cover the optimization of capital cost and the finding refinancing levers that can be sourced from other sources.

4.4 Company Sales (Inclusive due diligence by the vendor)

The process of preparing the transaction involves an analysis of the company’s position in the first place, evaluation and selection 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, and commercial due diligence)

The definition of the requirements in regard to the target and the process, as well as support for the search and valuation of targets (incl. due diligence procedure) Assistance in negotiations and M&A conclusion.

4.6 Distressed M&A

The use of restructuring levers to create an independent business case for turnaround for distressed assets that includes. the exchange of debt with creditors in order to restructure debt. This is followed by the follow-up of selling the assets 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 reduce risks (such for e.g. an unaligned management team, cultural conflict or slow process disruption to business and customers, and the lack of rigor for value creation) This process involves planning and managing integration (PMO) and value capture and other activities as well as 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 challenging arrangements on behalf of their client. This includes IPOs and separations, as well as alliances and joint ventures.

First of all, IPOs or more precisely, public offerings require extensive preparation from the business who wants to be listed. M&A consultants assist companies in going public in a variety of ways:

In formulating and communicating a persuasive strategy to increase the value
Making plans for the public market as well as 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)
The development of capabilities is essential for long-term growth in the capital markets

Second, separations are typically needed due to legal as well as strategic factors. The divestitures of certain areas of a business are typically complicated and are comparable to M&A and integration procedures. M&A consultants can speed up and handle these processes efficiently by aiding in the definition of a divestiture strategy (incl. reviewing the portfolio and creating an equity store to facilitate the transaction) as well as carve-out and management (incl. Design and management of NewCo processes) as well as the ability to facilitate transactions.

In the end, M&A consultants support clients in defining the strategic basis for partnerships and identifying the most suitable partners. They also assist in the formation of an alliance (JV) or an alliance conformity with goals and goals. In order to structure a partnership, consultants are required to assist with legal governance and governance set-up as well as operating model design and monitoring over the long term. A mere 25% of JVs succeed in achieving all of their initial goals and more than 70% of them face difficulties in the initial three years.

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