In the third quarter, M&A activity in the US and Canada increased dramatically, exceeding both 2012 and 2011 activity levels. Europe has also seen a resurgence of M&A activity despite some very difficult economic conditions. M&A activity is also up in Asia / Pacific, Africa / Middle East and in Latin America; however, Latin America hasn’t seen as much of an increase as the other geographies.

The question that this raises is why is M&A activity increasing? There are many reasons for this, including strong fundamentals, e.g., cheap and available capital, but also the simple fact that companies find M&A to be a very attractive way to build or defend shareholder value. Clearly, it’s faster and more advantageous for a company to acquire another business, people, products, equipment, customers, etc. than to build it from scratch. That’s an opportunity for both buyer and seller.

The fourth quarter is an excellent time to begin exploring the acquisition or divestiture of a business to build or protect shareholder wealth in the coming year. I founded Versailles Group almost 27 years ago as I’m passionate about helping management and/or owners grow or divest their businesses to enhance shareholder wealth.

Year-to-date, M&A activity has been robust, as reflected in the chart below. Despite a modest start to the year, the value of M&A transactions is up, over the same time period last year, in all regions except for Asia Pacific.

Low interest rates, willing lenders, buyers with large cash balances, and other strong fundamentals are contributing to M&A activity around the world. And, it appears that deal multiples are increasing due to competition between private equity firms and strategic buyers. One of the strategies of both of these types of buyers is to enhance shareholders’ wealth via the acquisition of companies.

There are two questions that every business owner or CEO should ask, at least annually: when should we acquire a company and when should we sell either all or part of the company. The answer is not always straightforward, but the question is worthy of significant attention. With over 30 years of M&A experience, I have personally seen many businesses miss valuable opportunities by hesitating to consider a transaction.

Over the last six months, global M&A activity has steadily increased as the US and other economies have continued to rebound. This increased activity spiked in July as buyers and sellers have moved quickly to close transactions.

Shrewd owners, managers, and companies are seizing opportunities at a rapid rate. Cheap financing is still widely available; however, not all buyers are using credit facilities. Warren Buffet’s team have concluded over 12 middle market transactions in the first six months of 2013. These were not billion dollar mega-deals; they were smaller transactions concluded to fulfill particular strategies.

In this environment, every business owner or manager should be considering their options for buying or selling. Growth via acquisition can be productive whether it is offensive or defensive. Selling can be useful to shed divisions or subsidiaries that are either unwanted or underperforming. Owners should also consider selling the entire business for a variety of strategic, tax, and other reasons.

There were 21,605 M&A transactions announced, worldwide, in the first half of 2013. The totals by geographic region were as follows:

The US is continuing to lead the volume of M&A transactions with Europe not too far behind. While everyone is continuing to debate whether there is a recovery and if there is a recovery how strong it is, smart companies are completing transactions to fulfill management and shareholder objectives. And, they will benefit from these transactions in both the near and long terms.

With all these transactions taking place, the obvious question is what is the right time to undertake a divestiture or acquire another company? There are many correct answers to that question; however, the real answer is that it depends on your objectives. Most of the time, people/companies wait too long to pursue a transaction; consequently, they miss many viable and valuable opportunities.

Merger and acquisition transactions present an opportunity for a seller and buyer to complete a transaction that will benefit both parties. That being said, the objectives of the buyer and seller need to be in alignment for a transaction to close. Finding a proper deal structure is a critical component in promoting the feasibility of a merger or acquisition. Generally, there are two primary structures for M&A transactions: an asset purchase or a stock purchase.

In an asset purchase, the purchaser will provide consideration in exchange for the assets (both tangible and intangible, e.g., goodwill, intellectual property rights, etc.) of the target company. Somtimes, the acquirer will assume selected liabilities of the company.

The assets purchased are at the buyer’s discretion and what buyer and seller agree upon. Most often, all of the assets are acquired and the selling company is left with the consideration, usually cash, and any remaining liabilities. The seller then either changes the name of the company and uses that entity for another purpose or liquidates the entity.

Most of the time, an asset purchase is favored by the buyer as it mitigates the possibility that prior, and perhaps unknown, liabilities from the selling company will be their responsibility. In particular cases, the avoidance of liabilities is not clear cut. For example, in certain jurisdictions, certain liabilities, e.g., environmental issues may penetrate any structure of an M&A transaction.

A stock purchase is much simpler than an asset purchase. The buyer simply purchases the stock of the selling company directly from shareholders in exchange for cash, the acquiring company’s stock, other consideration, or a combination of the three. The corporate status of the target company remains unchanged except that the stock is now owned by the buyer. In this case, the acquirer acquires all of the assets and all of the liabilities of the target company, unless agreed otherwise by the buyer and seller. And, in some cases, if the seller has valuable tax attributes, e.g., tax loss carryforwards, the purchaser may be able to utilize them.

Each structure contains advantages and disadvantages for both companies. The major concerns include tax considerations, liabilities, and the ease of completing the transaction. Other concerns will arise depending on the nature of the industries and companies involved. Typically, both parties will seek the advice of their tax accountants, lawyers, and investment bankers to determine the best and most efficient structure for a particular transaction.

In negotiating either a merger or an acquisition, the ultimate goal is to structure a deal in which separate companies combine with one another in order to generate shareholder value.

One of the most important and complex aspects of an M&A transaction is the process of negotiating. This usually begins shortly after the shareholders elect to pursue a transaction. While there are some minor negotiations that occur in the earlier stages of the process, the most important negotiations relate to the value and terms of the proposed transaction. With assistance from an investment bank or other intermediary, the potential acquirer, through a valuation of the target company, will determine the price of the offer in cash, stock, earnout, or a combination of the three.

The Letter of Intent, a non-binding document, will outline the valuation and other material terms of the potential transaction. The selling firm can accept, reject, or attempt to negotiate the offer. Most of the time, the offer price isn’t considered high enough or the other terms don’t coincide with the interests of the target company’s shareholders, which results in detailed negotiations, if both parties are willing. Both parties always retain the ability to reject the transaction if it doesn’t meet their financial and other objectives.

In order to complete a successful transaction, a large amount of collaboration and negotiation between the bidding and target company is required. Most importantly, both parties must understand each other’s objectives and it’s always helpful if both sides believe in win-win negotiating.

The importance of understanding each other’s objectives can be demonstrated by the following story. Two sisters were fighting over an orange and in order to resolve the argument, their father cuts the orange in half and gives one half to each of his daughters. While this seems like the best solution, both sisters actually ended up with a bad deal. One sister wanted the rind for cooking while the other sister wanted to eat the orange. Hence, both of them actually lost. Instead, if the two sisters had understood each other’s objectives, the orange could have been divided in a much better way, the rind to one and the contents to the other.

Versailles Group represented PayTrue Solutions, a payment media software company with offices in Uruguay and Brazil, in its sale to EFT Group S.A., a transaction processing services company headquartered in Santiago, Chile.

Here is a link to the actual Press Release or the text is listed below for your convenience.

BOSTON, May 28, 2013 -- Versailles Group, Ltd. (www.versaillesgroup.com) is pleased to announce that PayTrue Solutions (www.paytrue.com), with offices in Uruguay and Brazil, has been acquired by EFT Group S.A. (www.eftgroup.net). Versailles Group acted as exclusive financial advisor to PayTrue. Terms were not disclosed.

Versailles Group, a 26-year-old Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures, advised PayTrue’s shareholders on the transaction. Versailles Group works with companies in the U.S., Europe, Canada, Asia, and South America. The Versailles Group team was led by Donald Grava, Versailles Group’s Founder and President.

Founded in 2003, PayTrue offers a complete suite of solutions to address the various needs of the payment media industry. PayTrue’s operations focus on debit, credit, and prepaid cards, authorization of transactions, international brands, risk analysis, and fraud detection. PayTrue also provides professional services that complement its many solutions.

"PayTrue is a fascinating business in a rapidly-growing market, and it required a unique approach by Versailles Group to facilitate its successful sale" said Donald Grava, Versailles Group's Founder and President. "The acquisition of PayTrue has fulfilled the shareholders’ desire for a liquidity event, and provides EFT Group with an enormous opportunity to expand its South American operations. We are delighted to have exceeded our client’s expectations and look forward to watching EFT and PayTrue prosper."

EFT Group provides electronic transaction processing services for the finance and retail industries. EFT also offers business process outsourcing, infrastructure management, help desk, data center, maintenance, and integration services. EFT Group was founded in 1995 and is based in Santiago, Chile.

About Versailles Group, Ltd.

Versailles Group, Ltd. is a Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures. It provides its clients with a high level of personal attention, international experience, and professional execution. Since 1987, Versailles Group's skill, flexibility, and experience have enabled it to successfully close transactions, both domestically and internationally, in all economic environments. More information on Versailles Group can be found on its website, www.versaillesgroup.com.

Contact: Donald Grava

Media Contact: Donald Grava, Versailles Group, Ltd.

In the first quarter of 2013, M&A activity in Asia/Pacific and United States/Canada increased by 15% and 2%, respectively.

The remarkable surge of activity in Asia/Pacific is proof that an increasing number of companies are using their large cash positions, along with access to cheap debt, to expand in this region. In the United States/Canada, M&A experienced modest growth as financial and strategic buyers still view it as an excellent place to make opportunistic acquisitions.

Financial buyers are continually looking for companies that are poised for growth. Similarly, strategic buyers are looking to deploy large cash balances in an effort to expand geographically, increase distribution, and enter new markets.

Given these factors, it is highly likely that M&A activity will experience significant growth in the next three quarters.

Global M&A activity in Q1 2013 is projected to be lower than Q1 2012. As you will note in the chart below, it is also expected to be lower than Q1 2011. Q1 2013 was impacted by several events including the overhang U.S. election, fiscal cliff, and the continued Eurozone crises.

We expect the pace of M&A transactions in general, and the middle market in particular, to increase dramatically over the next three quarters. Companies are continuing to make strategic and tactical acquisitions for numerous reasons including the simple fact that they can get a faster return with less risk via a successful acquisition than by making capital expenditures.