When two or more businesses have converging strategic perspectives, interesting structuring possibilities opens up. The companies should as a minimum have good cash flows, strong balance sheets, and synergies should be possible to realize.
Typically, a structural solution include two or more operating companies, a new investor (financial / industrial), and debt (bank). The operating companies are sold to a newly created company, marketed to financial investors and banks.
The original owners of the operating companies can effectively reduce their exposure and (if required) retain a significant upside in the new structure (through the sale of newly created company, in combination with a reinvestment of parts of the sale proceeds in NewCo). The model facilitates potential different motivation among the owners of the operating companies for further ownership and/or operational commitment.
Opportunity for significant value creation
- By taking the initiative you gain control of the synergy potential and key strategic value elements, increasing the ability to obtain optimal terms & conditions;
- One can realize value, and at the same time benefit from the potential value increase through continued part-ownership in the newly established company;
- A strategic combination will provide the appropriate economies of scale in the form of more efficient operation, management, marketing, and more;
- Opportunity to gradually reduce the company's dependence on key personnel;
- Increased size normally means higher strategic value and provides multiple exit opportunities;
- Increased size provides better opportunities to grow through acquisitions;
- Financial leverage yields a higher return on equity.
As M&A specialists, we have initiated and implemented several complex industry structurings involving equity funds (”Private Equity"), private companies as well as subsidiaries and divisions of publicly traded companies. We offer qualified advice at all stages of such a process.