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1. Growing your businessBuying, selling, financing Scott Milne
Director, KPMG Corporate Finance
15 September 2005
2. Agenda The M&A market
Planning for growth
Buying
Selling
Financing
Conclusions
3. UK total M&A by value and volume
4. Planning for growth Limiting factors
Organic prospects?
Focus of business/management
Finance Alternatives
Acquire
Disposal of non core
Raise money/change capital structure
5. Buying Is acquisition the right strategy?
How do I identify a suitable acquisition target?
6. Tackling an acquisition Assessing value of target
Maximum price?
Funding?
Structure?
Understanding the Seller
Minimum price?
Partial or 100% interest?
Evaluating the competition
Pre-empt auction?
Minority shareholder in partnership?
Any aggressive competing bidders?
7. The role of KPMG Corporate Finance in a typical acquisition process
8. Will you succeed?
Establish the key rationale upfront
… and identify key value drivers
“Most acquisitions fail to deliver value”……. but
Have a clear synergy plan
Integrate management
Take account of cultural issues
Play the game
Understand the seller
Understand competition
Acquisitions can typically go wrong or perform much better than expected; this is not a decimal point game!
9. Selling Why sell?
How do I get the best price?
….and purchaser?
How do I get my business ready for sale?
10. Value issues – v – value drivers
11. A typical sale process – potential risks
12. How do you go to market? Applicability
One outstanding bidder
Seller with strong negotiating position
Small number of obvious buyers
Attractive assets
Some uncertainty as to strongest buyers
Desire to maintain confidentiality and…
… reasonable chance of success
Potential sale is already public knowledge
Difficult to identify with bidders
Financial sale a possibility
Strong risk of public leak during auction
13. Will you meet/exceed your expectations? Know your buyers
understand their drivers
Timing
The key to a successful sale process is control
release of information
timetable
negotiations
maintain competitive tension
Be prepared
have a strategy!
14. Financing Who and why?
Private equity
Mezzanine loans
Bank loans and overdraft
Vendor loans
Invoice discounting/ factoring
Leasing
15. Identifying providers of finance Sources of finance
16. Evolution of a buy-out company’s enterprise value and capital structure
17. Presenting your business to banks
18. Are you happy with your financing? Could I do more with additional finance?
… should I do more?
… can I do more?
… what would it cost?
Does the existing structure match the requirements of the business?
…today!
How involved do I want my funder’s to be?
… how involved should they be?
Do I understand my funders’ drivers?
19. Concluding remarks Many businesses will have a business plan and a budget
…do they have a strategy?
…successful transactors don’t take unmanaged/unmeasured risks
These transactions will change your business dramatically
…there are many pitfalls
…but getting it right can add significant value
A good advisor can pay for themselves/many times over!
20. This presentation does not carry any right of publication or disclosure to any other party. This presentation is incomplete without reference to and should be viewed solely in conjunction with the oral briefing provided by KPMG Corporate Finance. Neither this presentation nor its contents may be used, copied, quoted or referred to, in whole or in part, for any other purpose without prior written consent of KPMG Corporate Finance.
The information in this presentation is based upon publicly available information and reflects prevailing conditions and our views as of this date, all of which are accordingly subject to change. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of any information available from public sources. Whilst the information presented and views expressed in this presentation and in the oral briefing have been prepared in good faith, KPMG Corporate Finance accepts no responsibility or liability to any party in connection with such information or views and furthermore KPMG Corporate Finance in providing this presentation is providing no advice and making no recommendation as to any course of action.