One of the reasons for the failure of M&A deals is the excessive enthusiasm of those involved in the transaction process and the lack of experience of business shareholders.
To ensure that the financial and organizational targets of the deal participants do not remain dreams but become reality, it is necessary to “calculate” them and outline a clear plan of action. These tasks are performed by a financial advisor, in general better known as the corporate finance company. Whereas selling a family business or small scale “regular” enterprise can be done by a single financial advisor (“the spider in the web”), for most deep-tech companies this is no longer a feasible configuration. The set of responsibilities as well as the tasks to be specified and executed have a level of complexity and, more importantly, a breadth and depth that makes it virtually impossible to be done by a single person. A deep understanding of the value proposition of the company, the ability to build a detailed acquisition memorandum and build the proper long- and short lists of potential acquirers is an absolute must for a successful M&A project. In addition, a solid valuation must be built to not only provide a foundation for any negotiations, but also to establish a proper mandate for the shareholders of the company. It is also important that the company can continue its own work and is not loaded with producing vast amount of materials required to build the acquisition dossier.
Financial advisors, generally known as corporate finance companies, are essential in guiding the M&A process. While a single financial advisor might be sufficient for selling a small-scale enterprise, this configuration is often inadequate for deep-tech companies. The level of complexity, breadth, and depth in deep-tech deals require a team of experienced professionals to handle various aspects of the transaction.
A corporate finance company typically handles several key responsibilities in a deep-tech M&A deal:
Valuation and Financial Analysis: Corporate finance companies perform thorough valuations of the deep-tech company, considering its unique value proposition, technology, intellectual property, and market potential. This solid valuation forms the foundation for negotiations and establishes a proper mandate for the shareholders.
Building the Acquisition Memorandum: This comprehensive document outlines the company’s financials, operations, technology, and market position. It is crucial for attracting potential acquirers and sets the stage for the M&A process.
Creating Long- and Short-Lists of Potential Acquirers: Understanding the ecosystem and identifying the right set of potential acquirers is critical. Corporate finance companies with expertise in the deep-tech sector can create targeted lists of potential buyers who have a genuine interest in the company’s technology and market segment.
Deal Structuring and Negotiations: Corporate finance companies help structure the deal, ensuring that it aligns with the shareholders’ objectives and meets the financial targets. They also lead negotiations, balancing the interests of both the buyer and the seller.
Deep-tech companies operate in specialized markets with unique technologies. Therefore, it is essential to engage corporate finance companies that have experience in these markets. Understanding the industry, technology, and competitive landscape allows financial advisors to identify key value drivers, potential synergies, and risks that might not be apparent to those unfamiliar with the sector.
Another critical role of corporate finance companies in deep-tech M&A deals is to ensure that the company can continue its operations without significant disruptions during the M&A process. The preparation of vast amounts of materials required for the acquisition dossier can be burdensome for the company’s management team. By taking on this responsibility, corporate finance companies allow the business to focus on its core activities while facilitating the M&A process.
The role of corporate finance in deep-tech M&A deals is vital for the success of the transaction. From accurate valuations and financial analysis to creating detailed acquisition memorandums and negotiating deals, corporate finance companies offer the expertise and experience needed to navigate the complexities of deep-tech M&A. By engaging a corporate finance company with specific industry knowledge, deep-tech companies can increase the likelihood of a successful merger or acquisition, ensuring that their financial and organizational targets become reality. Understanding the market, the company and the ecosystem is the foundation to a successful deal.
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