Buying and selling a company or business, often referred to as an M&A (mergers and acquisitions) transaction, typically takes several months to prepare and execute. But sometimes you just don’t have several months. If cash is running out and the transaction needs to be accelerated, more specialist skills and experience will be required to advise and implement the deal.
Accelerated M&A transactions are usually completed within a few weeks, or even just days, often with the commercial driver being the avoidance of insolvency and its accompanying destruction of enterprise value. As with any time-constrained exercise, speed of action has increased importance, whilst some finer points of the deal may be deemed immaterial. One way to maintain value is to start the process early, to take specialist advice now if there is a risk that value may break below the equity level.
Typically, accelerated M&A generates its own fall-back positions as purchasers will explore the merits of acquiring the business and assets without the associated liabilities. In an ideal world any such business and asset deal would happen without insolvency intervention, but often if the purchaser is unwilling to take on all the liabilities they will not be able to be met from the consideration.
If the market speaks with the result that there is no residual value to shareholders, value to creditors is often maximised by planning the transaction in detail beforehand and executing it simultaneously with opening insolvency proceedings – a pre-pack administration. Appropriate communication and transparency is required in such cases to avoid any suspicion that there has been a phoenix transaction where creditors were unfairly disadvantaged. But provided it is properly explained, a pre-pack can deliver significant benefits through minimising operational disruption. Trading in administration and a gone concern sale are other usually less value-preserving fall-backs that may need to be explored.
When accelerated M&A is called for, the key requirement is an experienced adviser who is sensitive to developments in fast moving situations, whilst being decisive and able to take advantage of glimpsed opportunities. Recognising the contributors to value in a business and appreciating buyers’ particular needs are important abilities and the accelerated M&A adviser needs to be adept at pitching good news whilst acknowledging the bad – without wasting time negotiating trivia. Delivering such situational experience efficiently from a team with the full range of corporate finance, transactional, restructuring, insolvency and tax skills required, and recognising that every deal is different, is our approach in Mercer & Hole’s Corporate Advisory Services. It’s one that our clients value.
If you would like to discuss this further, please get in touch.