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News – 10.04.24
Form PF: Are you up to speed with the latest developments?
Through this insight we will bring to your attention the main changes in a bitesize manner so that you can stay abreast of the requirements as they may apply to your firm. … Read more
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Tax relief on heritage assets: Am I eligible?
For assets considered to be of national heritage, relief from Capital Gains Tax and Inheritance Tax is available. … Read more
Upcoming event – 29.04.24
Governance code updates and advice for Further Education colleges from Buzzacott and the ESFA
Join Buzzacott and the ESFA for a governance update for further education colleges … Read more
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This is why, when advising clients, we communicate and champion the consideration of non-financial factors that can affect a deal’s price.
Here are three of the most underrated qualitative drivers that you should consider when maximising your deal.
Many of our clients have multiple shareholders or stakeholders, and motives can naturally differ when deciding on transactional goals. Alignment across these individuals or groups of individuals and initiating an open conversation at the start of your transaction is crucial. From the outset, we work with our clients to establish what each party is looking for by aiming to walk away from that first handful of meetings with a clear, aligned view of the goal.
Private equity transactions often allow for more flexibility in catering to multiple shareholder/ stakeholder ambitions (i.e., different quantum of cash out/ roll, etc.). However, irrespective of deal type, having alignment across key individuals at the company is important to ultimate success. Returning to that agreed collective goal is essential during periods where for example, conflicting views over detailed warranties and indemnities arise. This approach is key when moving forward and maintaining the price and deal structure that has been agreed upon at the outset.
Disagreements can also arise between the selling parties, e.g., between the management team and shareholders. This can cause concerns from a buyer or investor perspective regarding the future of a working relationship and, therefore, the deliverability of the deal. This is why our team focuses on the alignment of all parties involved in the deal from the outset.
This is important between all parties in a transaction - client and advisor, seller and buyer or investor, and advisor to buyer/ investor and their advisors. For businesses themselves, building trust with the buyer or investor is critical. During the height of intense negotiations, this trust and relationship that has been built, will inevitably be tested.
Additionally, it is the job of a good advisor to understand the pain points, areas of sensitivity and “red lines” of all parties in a transaction to help manage and deliver a smooth process. No matter what each business does, it is people selling to people. Therefore, the human nature of trust can have extremely positive impacts on a deal -reinforcing the terms of a deal and the reasons for the two parties coming together, as well as negative impacts on a deal - causing, in most extreme circumstances, irreversible damage to the trust, and leading to a deal failing, if they can no longer agree on working together post-completion.
Part of the skill and effort in maintaining alignment and trust in a process, which, as described above, maintains the price, is down to good communication.
As transactions, particularly in today’s market, can take six months or more to complete, the business being invested into or bought continues to trade and evolve, and many factors can impact trading during that time. Even when businesses face unforeseen challenges during a deal process, understanding, managing and, most importantly, communicating significant events or obstacles, such as the loss of a major client, is paramount to maintaining trust with the other party.
Where managed well, keeping the lines of communication open and flowing can help offset or entirely mitigate otherwise adverse impacts of negative changes to trading. Equally, keeping up the communication of all the great new developments within the business (winning new contracts, key management hires, awards, etc.) can help to reinforce the rationale for the deal and maintain or, in some cases, increase the price.
If you are looking for an adviser who takes a holistic approach to advising you, and looks beyond the numbers, into the story that drives and maintains value and price throughout a transaction, then please do get in touch.
