Blog

Leaking information on M&A deals boosts deal values

June 23rd, 2017 by Chris St Cartmail

Leaked data on mergers and acquisitions (M&A) boosts the average value of deals by $21 million, new research from Intralinks suggests.

The 2017 Intralinks Annual M&A Leaks Report revealed that in 2016, almost one in 10 (8.6 per cent) of global M&A deals were leaked ahead of any public announcement of the transaction. While similar to 2015 figures, the statistic represents a significant jump from a six-year low of six per cent in 2014. These results come despite the efforts of financial regulators to stamp out deal leaks and boost fines and penalties for market abuse and insider trading.

India topped the list of the top ten hotspots worldwide for deal leaks, with 16.7 per cent of the country’s deals being publicly leaked, followed by South Korea (16.1 per cent) and Japan (12 per cent). In comparison, the countries with the lowest rate of leaks include Canada (4.3 per cent), France (4.3 per cent) and the UK (7 per cent).

The Retail, Real Estate and Consumer reported the biggest problems with leaks, with the latter seeing its rate of deal leaks jump from 7.8 per cent in 2015 to 15.5 per cent in 2016. Meanwhile, Healthcare, Energy & Power and Industrials witnessed the fewest breaches.

So why do M&A deals leak? The answer lies in the higher target takeover premiums these leaks generate, resulting in higher valuations. As the Intralinks report highlights, this pattern has held true from 2009 to 2016 – during which time the median takeover premium for leaked deals has been 47 per cent for leaked deals vs. 27 per cent for non-leaked deals.

Percentage of M&A deal leaks by region

Percentage of M&A deal leaks by region

However, it’s not all bad news for businesses. Philip Whitchelo, Vice President of Strategy and Product Marketing at Intralinks, suggests the appeal of deal leaks may be waning.

“The rate of deal leaks in markets where leaking was rampant a decade ago, such as the UK, has reduced considerably: a reflection of new regulations against market abuse and much stricter regulatory enforcement.

“Countries such as India and Hong Kong, which have comparatively high levels of deal leaks, are also making more efforts to tackle market abuse and insider trading. Overall, against the perceived benefits, those leaking deals must also weigh the risks, and those benefits appear to have reduced in 2016,” he commented.

Subscribe to the Business Sale Report for access to more exclusive videos and inside track access to the latest deals and business sale opportunities.

Most costly buyer mistakes revealed

May 9th, 2017 by Chris St Cartmail


The most costly buyer mistakes are revealed in an exclusive video interview with Rob Goddard of Evolution Complete Business Sales.

The transcript of the interview follows:

What are the most costly mistakes that a business buyer can make?

I think to buy a business that doesn’t work out.

If you look on the internet you’ll find that the failure rate of an acquisition is between 50% and 80% in this country, depending on what sector you look at, within 5 years of the acquisition taking place.

It’s a high-risk strategy – where it works, it works extremely well.

And there are all sorts of reasons why that failure rate is so high in this country.

One of the things is buyers don’t take advice from professionals that are in the sector.

Another reason is they don’t do their due diligence properly. Because most people who are selling probably won’t tell you everything about their business. It’s like selling a second-hand car. They will tell you all the nice bits, all the bits that work well. What they often won’t do is tell you the things they are not happy with, the things that don’t work well. It is the buyer-beware aspect. And there’s a high failure rate.

Another costly mistake is buying a business for ego. It’s a no-no in terms of acquisitions.

Just because you have the cash to buy something doesn’t mean you need to buy it. It’s got to fit with your strategy for your overall business. Buying the wrong business, at the wrong time and for the wrong reasons is probably the most costly mistake a buyer can make.

Just because you can doesn’t mean to say you ought to.

What can be done to prevent these mistakes from happening?

When you’ve got several million pounds to spend or more, if you’re in that lucky position of having surplus cash, just because you’ve got the cash to spend, spend it wisely and make sure it’s in keeping with what you want to achieve with your main business – otherwise it could be a very costly distraction.

We try and find out: why do they want to buy? Why do they not just set up in competition with existing players in the industry? We want to tease out their motivations for acquisition. Increasing turnover shouldn’t be one of them – it’s the old adage of turnover is vanity, profit is sanity. If you make the wrong acquisition your bottom line could go through the floor. Don’t buy the wrong thing for the wrong reason.

**************
Subscribe to the Business Sale Report for access to more exclusive videos and inside track access to the latest deals and business sale opportunities.

View the first in our video mini series – The most common hold ups in a business acquisition here.

Founders don’t always win big on ‘successful’ exits

April 3rd, 2017 by Robert Taylor
You start a business. It grows. Exponentially. Bigger and bigger. More customers, more sales. Suddenly people are knocking on your door. Venture capital houses, who want to invest money in your business and help you grow. They come in and establish themselves. More good times ahead. All of a sudden you’re a well-known name. You start to attract interest from buyers, perhaps a bigger rival. You sell. Payday. You win big, right? Live happily ever after.

Well, maybe not.

Venture capitalists are known for making apparently risky moves – investing in young start-ups still getting a feel for things, perhaps in the fluid tech or digital sectors. But these apparently risky moves are usually well-thought-out strategic investment decisions designed to ensure that if a company they’ve put money into does get snapped up, they will do very well out of it indeed. Potentially at the expense of the founder(s).
Read the rest of this entry »

The most common hold-ups in a business acquisition

February 12th, 2017 by Chris St Cartmail

The most common hold-ups in a business acquisition are revealed in an exclusive video interview with Rob Goddard of Evolution Complete Business Sales.

The transcript of the interview follows:

It usually revolves around one topic which is that the buyer and seller or one or the other get lost in the detail.

They lose sight of the main objective which is to try and put two businesses together.

Or if it’s an investment play, that an incoming investor adds value to the business.

Often they can get lost in items of detail – what happens to the deal process is that it slows it down.

It also makes it more expensive because not only with management on both sides trying to iron out a deal, but if you’ve got lawyers acting – and accountants and other advisers – the bills quite often, particularly with lawyers, can extend. Especially if you’re playing your lawyer by the hour.

One’s got to be careful of dragging out the deal negotiation process unduly. It will get expensive and something comes into play – which will be the subject of my second book – which is deal fatigue.

Rob Goddard
With buyers and sellers there comes a point when it goes on for far too long and one or both parties just get tired of it all.

They keep going round the houses and nothing seems to be able to be crystallized. You can be 18 months down the line and there’s nothing concrete, nothing materialized and no agreement to go forward.

What does this mean for the deal?

Stalemate! One or the other will fade away, disengage from the process and you may have lost a year, 18 months, two years. Three years is the longest period of time I’ve heard about which is incredible. It should be done over a three, four month period to negotiate, to construct a deal.

And then get the lawyers involved and make sure the lawyer is on an hourly rate. Sorry lawyers, fixed price!

**************
Subscribe to the Business Sale Report for access to more exclusive videos and inside track access to the latest deals and business sale opportunities.

Survey of pub sales reveals large increase in freehouse deals

January 5th, 2017 by Chris St Cartmail
Green Man Pub
The volume of operational freehouse pub sales has shot up by 150 per cent in the last year, whilst bottom-end pub sales are down by 28 per cent.

This is according to the annual ‘Survey of Pub Sales’ carried out by leisure property specialists Fleurets. The survey revealed the stability of the pub sales market in general, which is surprising considering the political, regulatory and economic turbulence over the past twelve months.

Read the rest of this entry »

Alternative finance available via ‘Asset Based Lending’ leaps to £4.3 billion

December 12th, 2016 by Chris St Cartmail

asset based finance in the UK
Amount of available lending against machinery and property in the UK

The amount of alternative finance available under ‘asset based lending’ to UK businesses reached a record high of £4.3 billion, up 22% in the last year.
Read the rest of this entry »

Company liquidation rate in England & Wales lowest since records began in 1984

November 27th, 2016 by Chris St Cartmail

Insolvency Office statistics reveal that the company liquidation rate in England and Wales is at its lowest level since records began in 1984. There has been a continuous downward trend in the rate since 2011.

In the 12 months to the end of September 2016, 0.41 per cent of active companies (about one in 244) went into liquidation. At the same point last year 0.46 per cent of companies (one in 215) had collapsed into liquidation in the previous 12 months.

Read the rest of this entry »

Manny Stul – EY Entrepreneur of the Year 2016

October 11th, 2016 by Chris St Cartmail

EY’s Entrepreneur of the Year Awards is an annual celebration of the energy and strength of businesspeople the world over. The awards aren’t just about individuals; they shine a light on the passion and spirit that continues to reinvigorate the business world and beyond.

Manny Stul

Manny Stul – EY photo

Read the rest of this entry »

A guide to buying assets from insolvent companies

September 29th, 2016 by Chris St Cartmail
Unfortunately, there will always be companies that fail to succeed and are closed down. The assets left behind, like equipment, machinery and property, are left for the licensed insolvency practitioner (IP) or liquidator to sell on to try and make some money back for creditors who are owed money. The profits made from asset sales are then distributed equally to creditors and the case is closed.
Read the rest of this entry »

What now for British M&A?

June 24th, 2016 by Chris St Cartmail

The Great British public has spoken and voted for the country to exit the EU. Cameron has resigned and the government is trying to put together an economic and legal plan for the road ahead.

Business owners will need to stay calm and concentrate on trading as usual. The uncertainty of markets and currencies may create difficult trading conditions for larger businesses who have suffered share price falls.

Economically it will be important for Britain to maintain inward investment and much of this, at least in the short to medium term, depends on the deal that the UK now negotiates with the EU. Hopefully the country will successfully negotiate continued access to the 500 million people across the EU and European Free Trade Association. How it is going to do that without allowing for the movement of Europeans across its border is going to be interesting. Despite no other country having managed to this so far, Britain’s trade involvement with the continent is substantial and mutually beneficial, so we should see a deal being struck with favourable terms after some serious negotiation.

In the event of Britain not succeeding in its continued membership of EFTA, all is not lost. Currently around two thirds of UK exports are destined for non-EU countries and it is entirely possible that over time the new freedom to negotiate free trade treaties will increase substantially to mitigate any EU shortfall. Of course there are already treaties in place between some of these countries and the EU which will need to be renegotiated by Britain.

Legally, the retreat from Europe shouldn't’t affect private M&A deals where the required documentation is reliant on English law and the exclusive jurisdiction of the English courts. However current and recent M&A contracts ought to be re-examined from a legal perspective in the light of Brexit. That’s because Britain’s withdrawal could be deemed a ‘material adverse change’ and therefore potentially enable a contractual clause to be invoked.

M&A deal flow slowed slightly in the lead-up to the referendum, though only from round mid-May. It ought to be noted that foreign (non-EU) investment into the UK has increased substantially this year over last year. This will pick up again now the referendum is over. The lower pound will certainly make UK company assets more attractive.

British business is generally agile and used to a fast-moving, competitive trading environment and an uncertain political and economic landscape. The legal and regulatory environment is robust and corporate tax rates are low. British creativity and ingenuity continues unabated.