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.

Over the past few years, the M&A landscape has changed quite dramatically from a geographic standpoint. As we’ve mentioned in the past, M&A activity in Europe has seen a quite precipitous decline, with associated increases in M&A activity in the United States / Canada and Asia / Pacific regions, and we fully expect this trend to continue in the near term.

The one region that has failed to receive much M&A attention is Africa / Middle East, which, in the chart above, follows nearly the same path as that of the Latin America and Caribbean region; however, it appears that there may be a sharp increase in M&A activity in Africa over the next three to five years.

Africa has a plethora of natural resources, such as oil and natural gas, iron ore, copper, etc. Many Chinese companies have already recognized the value and invested in these areas. As companies with large cash positions from other regions of the world start to deploy their capital to develop these natural resources, there will be a noticeable uptick in M&A activity in Africa.

2012 was a year of uncertainty. There were notable events, such as the U.S. Presidential election, fiscal cliff, and the status of Greece’s future in the European Union, that caused many companies to delay their execution of various growth strategies.

Despite these hesitations, on a global basis, the number of Middle Market M&A transactions increased by 4% from 2011 to 2012.

Looking forward, we expect that some companies will retain a conservative strategy due to the upcoming U.S. debt ceiling drama and the European socio-economic issues. However, shrewd companies will take advantage of the vast number of global growth opportunities and make strategic offensive and defensive acquisitions. As a result, we expect there will be a higher level M&A activity in 2013.

The year 2012 was a tumultuous time, filled with uncertainty and apprehension as the global community grappled with a series of significant events. From the highly anticipated U.S. Presidential election to the looming threats of the fiscal cliff and the precarious future of Greece within the European Union, these key moments left many businesses feeling cautious and hesitant about their growth strategies. As companies navigated through the turbulent economic landscape, many chose to delay their plans for expansion, opting instead to adopt a more conservative approach.

Looking ahead to the future, it is likely that some companies will continue to tread carefully, especially in light of the upcoming U.S. debt ceiling drama and the ongoing socio-economic challenges in Europe. However, for those with a keen eye for opportunity, there is a wealth of global growth possibilities waiting to be seized. By strategically pursuing both offensive and defensive acquisitions, these savvy businesses will be well-positioned to capitalize on the changing landscape and drive higher levels of M&A activity in 2013.

Versailles Group is a Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

As 2012 comes to a close, we’d like to wish you season’s greetings with our best wishes for a very happy holiday!

With less than a month left in 2012, this year was an exciting year for global M&A – all regions experienced at least a 3% increase in M&A activity, except for Europe, which saw a 9% decrease. The Asia/Pacific and Latin America/Caribbean regions experienced the largest increases, 5% and 11%, respectively. The surge in activity in these two regions was primarily due to cross-border M&A whereby companies in one region seized an opportunity in another region.

As we transition into 2013, there will be new opportunities worldwide. As a great man once said, “there are no problems, only opportunities.” Some of the questions facing the world are:

How will the political and economic turmoil in Europe be resolved?

How will the Democrats and Republicans resolve the “Fiscal Cliff” issue in the United States?

Will China continue growing at a rapid pace, or will it begin approaching the “hard landing” many predict will occur?

Will GDP growth in Brazil and the other Latin American countries accelerate in 2013?

In a constantly evolving global market, challenges will always arise. However, the key lies in seizing the opportunities that present themselves worldwide to strategically position your business for not just growth, but sustained profitability. By staying ahead of the curve and actively seeking out potential avenues for expansion and development, businesses can navigate through obstacles and emerge stronger than ever. It's not just about overcoming challenges, it's about leveraging them to propel your business towards success in an ever-changing landscape.

Versailles Group is a Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.

Worldwide, middle market M&A transactions, those with transaction values less than US$1 billion, have been occurring at a rapid pace in the first month of Q4. Middle market M&A in the United States, in particular, is seeing tremendous activity whereas M&A in Europe is continuing to struggle.

In the US, at this pace, we expect over 4,000 transactions in Q4. This will represent an increase of over 11% as compared to the 3,604 transactions in Q4 of last year. This growth can be explained by a number of factors, but most importantly, corporations are using some of their large cash balances and the ability to issue low interest debt to pursue synergistic and other acquisitions.

Traditionally, companies use their excess cash for either capital expenditures or acquisitions. According to a recent study published by Goldman Sachs, capital expenditures are not increasing as companies are deploying their cash for acquisitions, which provide immediate access to growth and less risk. This is, perhaps, the largest single driver in the current middle market M&A boom in the US. Furthermore, low interest rates are enabling companies to issue debt quite cheaply thereby helping companies without enough cash to fund acquisitions.

In Europe, the M&A landscape is facing challenges due to various factors such as economic uncertainty, political instability, and regulatory changes. These uncertainties are causing hesitation among companies to engage in M&A activities, leading to a slower pace of transactions compared to the US market.

Despite the struggles in Europe, the Middle East and Asia are also experiencing an increase in middle market M&A transactions. The Middle East, in particular, is seeing a surge in activity driven by the region's efforts to diversify its economy and attract foreign investments. Asia, on the other hand, is benefiting from a strong economic growth trajectory and an increasing appetite for cross-border acquisitions.

Overall, the global middle market M&A landscape is dynamic and evolving, with different regions experiencing varying levels of activity. Companies are strategically leveraging their resources and taking advantage of favorable market conditions to pursue growth opportunities through M&A transactions.

Versailles Group is a Boston-based investment bank that specializes in international mergers, acquisitions, and divestitures.  Versailles Group’s skill, flexibility, and experience have enabled it to successfully close M&A transactions for companies with revenues between US$2 million and US$250 million.  Versailles Group has closed transactions in all economic environments, literally around the world.

Versailles Group provides clients with both buy-side and sell-side M&A services, and has been completing cross-border transactions since its founding in 1987.  

More information on Versailles Group, Ltd. can be found at www.versaillesgroup.com.