Priming your business for the M&A Game

By Stephen Dearing, Vice President of EMEA at ansarada

As a business that facilitates thousands of global M&A deals every year, we have picked up a good understanding of the difference between a failed and a successful transaction.

In the fintech sector, things seem to travel at supersonic speeds and no sooner have you launched your business do you find yourself preparing for the next stages – raising capital, a merger or an acquisition. We are seeing a significant number of acquisitions in this sector, so putting your best foot forward and understanding the process is the best starting point.

Fintech businesses are of particular interest because they possess the intellectual property, experience, culture and other elements that traditional financial organisations don’t tend to have. The result is that these companies are highly sought after and scrutinised by the market with the most interesting concepts targeted for acquisition.

But how does a company go about becoming an attractive acquisition target? It isn’t just about hitting goals and impressive numbers (although these do help).  Behind the scenes are highly sophisticated and complex processes across a number of different levels.

This means, that if being acquired is the desired course of action – whether it is within two or ten years – success often relies on many factors such as public image and being meticulous by having everything in order to facilitate the all important negotiation and due diligence stages.

Looking Good

The first step to prepare for acquisition is learning how to present your business in public. You need to know the possible purchasers inside and out, and understand what their triggers are. The obvious ones are direct competitors who are naturally already lined up alongside you. However, potential acquirers could also come from a variety of businesses that need your IP, experience and people – which are all rare and valuable commodities in the burgeoning fintech market.

Attractive figures on spreadsheets are all very well, but having the right image in the media, at events and being outspoken are also considerations that affect the value and desirability of a business. It’s often the ones that have clear positioning and shout loudest that are noticed and snapped up.

Having a strong line up of c-suite executives is another factor that makes a business desirable. A solid company that has the right board members – from chairman through to highly-connected non-executive directors – is easily marketable.

Documenting

The documenting of all aspects of your business from inception may seem to be common sense, however we regularly see highly sophisticated businesses struggle to gather together even the very basics.

The defining moment for any M&A deal is the due diligence stage, when every document needs to be collated and put into a virtual data room. This is when potential acquirers find the gaps and start asking difficult questions. It’s the critical stage which will make or break a deal, and in our experience, time and time again, we see that after months of negotiations, deals fail because the right documentation is not available.

Problem Solving

Identifying possible issues before M&A negotiations are a good way to ensure a strong valuation. The best way to do this is through quarterly reviews that cover all aspects of the acquisition criteria. This includes legal issues such as intellectual property rights, asset reviews, current and pending shareholder problems, employment concerns and all other areas which will affect the eventual sale.

Disruption

Everyone involved in an acquisition naturally wants the process to be quick and hassle free. However, the unfortunate reality is that the whole process – which can take anywhere from three months to three years – is very disruptive. Preparing for this by considering all the factors outlined in this article well before any acquisition talks are held will alleviate some of the pressure. However, as we have seen by facilitating thousands of large, global acquisitions, the due diligence process takes a lot out of business owners, advisors and their employees. As a virtual data room provider, we understand that it is important for the due diligence, Q&A process and other elements to be facilitated through highly accessible and secure technology where tens and hundreds of people involved can sift through thousands of pages of documents as easily as possible.

Stephen will be giving further insight on virtual data rooms during the Morning Session on Wednesday 16 September

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