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Mergers and acquisitions case study

The secrets of swift and successful acquisition

Today, the M&A climate is undoubtedly difficult.  The recent disposal of a large, diverse plastics and packaging company proves, however, that it is still possible to complete major transactions fast and efficiently while satisfying the priorities of both the shareholders and the businesses involved. 

Our Corporate Finance practice recently led the search for a new financial partner for one of the few major UK-based manufacturers still wholly in private hands.  Although it was a top quality international business, the current shareholders felt that it was time to consider a new ownership structure which would better meet the future demands of the business.  The entire transaction was successfully completed in less than six months with a large, private equity house taking the majority stake.   Even more importantly, according to the group’s executive chairman, it found ‘a financial partner wholly in sympathy with the values and strategy of our company.” 

Know your target
This acquisition illustrates the necessity – often overlooked - of combining two qualities: speed and in-depth industry knowledge.  The partner leading the transaction has a long history of involvement in the same sector and was able to combine his industry knowledge with corporate finance expertise.  He already thoroughly understood the market dynamics of each component in the business.  It meant he had a clear view of who could benefit through such a ‘marriage’.  We could therefore hunt with authority over a narrow, closely focused field of potential acquirers.  Momentum is a critical factor in any corporate finance transaction.  Once lost, it is easy for the whole process to become bogged down, jeopardising day-to-day running as well as storing up problems for the future operation.  Our short-list included only backers known to have the financial resources, the industry knowledge and the willingness to move quickly in providing a solution for the whole business. 

Local knowledge matters
The head of the group had stressed that he wanted sensitivity to the management and the employees.  Confidentiality was vital; any leakage would have destabilised both the business and the people working within it.  At the same time, the operation wasn’t set up for disposal so information resided in separate locations throughout the world.  Our own international organisation allowed us to send in small teams from our local corporate finance practices to pull the information together very quickly.  At the same time, we were able to call on our experts across the practice to advise on specific issues, like pensions and tax, as the need arose.  Our core team of the partner, three directors and a personal assistant to the CEO, increased at times to 35 members, drawn from 6 offices across three continents.

Present a complete picture 
Many financial bodies, including investment banks, would struggle to give their clients the depth and breadth of advice needed for such a complex undertaking coupled with the ability to mobilise resources globally.  Unambiguous, complete information is needed for bidders to make a firm, rapid decision that delivers a fair value to all shareholders.  Any manufacturer contemplating a similar exercise should consider the all-round capabilities of their chosen adviser very carefully.  People talk a lot about global co-operation but it’s not often tested to this degree.  The acquisition has been conspicuously successful and we are now advising the new shareholders on subsequent acquisitions and disposals.

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