M&A Deals - The Benefits of a Global Auction

With regard to M&A Deals – the benefits of a global auction should always be considered when selling your business. It is important to offer a sell-side transaction as broadly as possible to achieve the best possible results.

A broad-based approach will result in a global auction for the company, thus ensuring the highest possible value as bids are received from across the globe. A multitude of bids to examine will reveal the true value of the selling company. It will also provide the seller with unique insights as some of the bids will have different structures. This will give the seller a chance to “mix and match” structures to obtain not only the highest value, but also the best terms.

Versailles Group has conducted a number of these global auctions. It should be stressed that all of these auctions are 100 percent confidential. It should also be noted that the results have been phenomenal, in terms of both value and terms. Versailles Group sold a company in Massachusetts to a company in South Africa. Another company headquartered in Houston was sold to a company in New Zealand. The firm has multiple success stories, all based on the international, highly confidential auction. In the case of the South African company, they paid two times the next closest bid, which demonstrates that this process works.

Entrepreneurs and corporate sellers should always be cognizant of the eventual sale of their business and should be preparing for a sale long before they think it’s time. Private equity investors and venture capital investors achieve success when selling businesses because they start preparing for a sale even before they invest.

Most business owners don’t think about selling their business, particularly when they’re starting out; however, it is something that should be considered annually. This should be done with a professional M&A advisor who can advise you about your company’s possible value, the market, possible timing, etc.

When it is time to sell, a broad-based approach to the sale should be your first consideration. Frequently, the best buyer is a company on the other side of the world. That being said, as with all M&A deals, confidentiality is paramount. Only responsible M&A advisors know how to conduct themselves and the sale of your company securely and confidentially.

Conclusion

An M&A advisor with decades of experience and a global reach will know how to create and facilitate a worldwide, confidential auction. That is the best way to achieve the maximum value and terms when selling a company. To summarize, for M&A deals, the benefits of a global auction should not be underestimated.

M&A Deals in 2014

M&A deal volume in 2014 was quite robust – almost US$4 trillion of transactions were completed worldwide, which was an increase of over 50 percent from 2013.
43,613 transactions were completed across the globe in 2014. The Americas and Europe experienced approximately the same M&A volume, with Asia Pacific trailing by a few points.

2014 M&A Deals By Region

 
By sector, excluding financials, high tech was the most active, followed by industrials, consumer products and services, and materials. Although telecom had the lowest number of transactions completed in 2014, deals in this sector were very large, resulting in over US$260 billion of deal value.

2014 M&A Deals by Sector

About Versailles Group, Ltd.

Founded in 1987, Versailles Group is a boutique 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 in the middle and lower-middle market. 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.

As one can see from the chart below, global M&A, as we’ve reported before, is flying high!

M&A activity for the 11 months ended November 2014 is at a record high since 2011 as buyers and sellers are coming together at a very rapid pace. Our belief is that many companies and entrepreneurs want to get deals done before interest rates increase, there is a change in US President, or there is another economic or political crisis. Many people remember the depths of the Great Recession and are taking the necessary steps to ensure their companies and personal net worth are better protected from any future economic downturns.

Buyers are strengthening their companies and sellers are paying off debt, diversifying, and in some cases retiring. What are you doing to increase or protect your shareholder value?

M&A deal activity is continuing at a rapid pace. Global volume this year has already exceeded US$3 trillion and will likely surpass last year’s record volume.

One particularly bright spot for M&A activity has been Europe. For the first time in recent history, European M&A has expanded dramatically. For the first three quarters of 2014, this has meant nearly US$800 billion of transaction volume. By comparison, for the same time period last year, there was less than US$500 billion of transaction volume in Europe.

The chart below shows the first six months of M&A activity for both 2013 and 2014. In all geographies, the volume, year over year, has increased.

The gradual improvement in the world’s economies is driving this increase in M&A activity and pushing multiples up. For example, across all industry sectors, the Enterprise Value to Revenues multiple has increased from 1.17x in 2012 to 1.26x in 2013 to 1.50x in 2014.

M&A activity in the first quarter of 2014 was quite strong. The value of transactions announced in the first quarter exceeded both 2012's and 2013’s first quarters. The value of announced transactions in the first quarter of 2014 also exceeded that of the last quarter of 2013, which is very dramatic as the fourth quarter is usually the busiest quarter of the year for M&A.

They say that April showers bring May flowers. M&A is similar! Devising a strategy and working hard to ensure the proper execution always results in a superior transaction. 

Versailles Group's one of the key ingredients is careful thought to ensure that the strategy and tactics will achieve the desired result.

As you will see from the chart below, worldwide, middle market M&A activity has been steady for the last three years despite numerous worldwide economic ups and downs.

Given the improving economic climate and the strong fundamentals supporting M&A, we believe that M&A transactions will increase in 2014.

We are halfway through the fourth quarter, and M&A activity looks fairly normal for this time of year. Typically, there is a huge surge of transactions that are announced or closed in December of each year. Many times, there are tax considerations that are driving a closing before year-end. In other cases, buyers and sellers have other objectives that they want or need to fulfill before year-end.

I founded Versailles Group in 1987 to assist middle-market and lower-middle-market entrepreneurs and corporations in closing the very best M&A transactions possible. Years ago, that was a concept. Today, it’s a reality. We’ve helped individuals and companies on five continents. In many cases, we’ve done multiple transactions for the same individuals or companies. The results reflect our passion for completing exceptional transactions.

The key to successful M&A is to begin exploring how a transaction might help fulfill your goals sooner rather than later so that there’s time to do it efficiently and effectively. Corporates typically pursue acquisitions or divestitures in the normal course of business and are well-acquainted with the process and possible outcomes. On the other hand, most entrepreneurs only do one or two transactions in their lifetime. For both corporates and entrepreneurs, it’s important that transactions be done well. That’s our forte!

November is an excellent time to consider your 2014 M&A goals. M&A is a very effective means of divesting an unprofitable business or divesting a business in order to diversify your portfolio. Many people wait too long before selling and find that the extra years of ownership didn’t add any value. On the buy-side, an acquisition can provide a route to new markets, provide additional product offerings, help diversify, etc.

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 of 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.

Founded in 1987, Versailles Group is a Boston-based boutique investment banking firm advising lower middle-market and middle-market clients on mergers, acquisitions, divestitures, private placements, and fairness opinions. The firm works with business owners, private companies, family-owned enterprises, and corporate clients in the United States and internationally.

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.

Founded in 1987, Versailles Group is a Boston-based boutique investment banking firm advising lower middle-market and middle-market clients on mergers, acquisitions, divestitures, private placements, and fairness opinions. The firm works with business owners, private companies, family-owned enterprises, and corporate clients in the United States and internationally.

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