Buy and Build

From my experience, I recommend that the integration issues that are important for buyers and sellers are already discussed during the acquisition phase and also set out in writing. Ideally, this should be done before the due diligence (company audit phase) begins, as this phase incurs higher costs for both parties. It should be transparent for both parties what is planned for the next one to two years after the takeover.

The market value method has now become established among engineering firms. This is a very pragmatic approach to determining the value of a company. All that is needed is the earnings before interest and tax(EBIT ) and a multiplier, i.e. a factor by which the average result is multiplied. The values for the last three years are normally used for this.

The duration of a business sale can vary greatly and depends on a number of factors, including the complexity of the transaction, the industry in which the business operates, the size of the business and individual circumstances. In general, a company sale can take several months to a year or longer. Below are some factors that can influence the duration:

Preparation phase: Before the actual sales process begins, many companies have to invest time in preparing their company for sale. This includes the preparation of financial data, the identification of potential buyers and the clarification of legal and operational issues. This phase can take several months.

Searching for a buyer: Finding the right buyer can take some time. This can range from identifying potential buyers, making contact and negotiations to due diligence.

Due diligence: The due diligence phase, in which the buyer closely examines the company in order to assess risks and opportunities, can also take several weeks to several months, depending on the complexity of the transaction and the special features of the company to be acquired.

Negotiations: Negotiations on the purchase price and contract terms can take some time and require several rounds.

Financing: Obtaining the necessary financing for the purchase can take some time and depends on the buyer’s financial situation.

Approvals and legal steps: In some cases, approvals must be obtained from supervisory authorities or shareholders, which takes additional time. Preparing and checking the contractual documents can also take some time.

Closing: The actual closing of the transaction can also take several weeks or months, as all documents must be signed and all necessary steps completed.

It is important to note that every business sale is unique and the duration can vary greatly. My experience shows that the seller often underestimates the time required for the acquisition phase (he also has to manage the ongoing business) and the buyer the time required for the subsequent integration phase. Thorough planning and preparation as well as cooperation with experienced specialists can help to speed up the process and make it smoother.

The integration of companies, whether through mergers, acquisitions or other forms of business combinations, is a complex process that requires careful planning and implementation. In my experience, the following six success factors are of particular importance:

• Strategy orientation: The integration strategy is clearly defined and forms the consistent guideline for the integration process (i.e. purpose, vision, mission, values, target business model, target operating model, roadmap)
• Leadership: Strong commitment from top management throughout the entire integration process – lived role model and change mentality
• Mobilization: Comprehensive, cross-functional involvement of managers, employees and experts – based on defined roles, responsibilities and degrees of autonomy.
• Communication and cooperation: Trusting and results-oriented communication and cooperation with existing and newly acquired companies at all levels of the company, promoted by top management and supported by executives.
• Transparency: Comprehensive transparency about the goals, measures and results of integration
• Agility: Simple and flexible structure and processes for integration – step-by-step, milestone-oriented roadmap

There are of course other factors, the list is very extensive. Successful integration of companies therefore requires a comprehensive and coordinated approach that takes all key factors into account. Effective integration management and the involvement of all relevant stakeholders are key to success.

The cost of M&A advice varies widely and depends on a number of factors, including the size and complexity of the transaction, the reputation and experience of the advisory firm and the nature of the advisory agreement. Below I have listed some factors that can influence the costs:

• Transaction size: Larger transactions usually require more work and resources on the part of advisors, which can lead to higher fees.
• Complexity: The more complex the transaction, the more time and expertise is required, which can increase costs.
• Experience and reputation: Renowned M&A advisors with a proven track record can charge higher fees than smaller or less experienced providers.
• Type of consulting contract: The costs may vary depending on the type of consulting contract. There are various models, including flat fees, performance-based fees (depending on the completion of the transaction), hourly fees and mixed models.
• Additional services: Additional services such as due diligence, tax advice, legal advice and company valuation can increase the overall costs.
• Period: Should the advisory services only cover the actual transaction phase (pre-merger phase) up to completion or should the integration phase (post-merger phase) also be prepared and accompanied?

It is difficult to give an exact average price for M&A advisory services, as costs vary greatly. In some cases, an M&A advisor’s fee may be a percentage of the transaction value, while in other cases flat or hourly fees may be agreed.

To avoid misunderstandings, it is advisable to clearly agree the costs and structure of the consultancy contract in advance. You should also carefully consider the qualifications and experience of the M&A advisor to ensure that they can provide you with the support you need.

The treatment of the acquired company’s personnel after an M&A transaction may vary depending on the objectives of the transaction, the agreements between the parties and the applicable labor laws and practices. Below are some common scenarios for the future of the acquired company’s employees after an M&A transaction:

Retention and integration: In some cases, the acquiring company wishes to largely retain the existing workforce of the acquired company. In this case, the employees of the acquired company can be integrated into the parent company and continue to work in their positions.

Restructuring and downsizing: In other cases, the aim of the acquisition may be to reduce costs and create synergies. This can lead to restructuring and job losses in the acquired company.

Independence: In some cases, the acquired company can continue to operate as an independent unit within the acquiring company, with the employees remaining in their previous functions and under their previous management.

It is important to note that dealing with employees after an M&A transaction should be carefully planned to address potential legal and cultural challenges. Compliance with applicable labor laws and regulations is critical to avoid legal issues. Successful integration and the handling of personnel are crucial to the success of an M&A transaction and the realization of the desired synergies.

Clear and transparent communication is therefore essential. Employees should be informed about the upcoming changes and have the opportunity to ask questions and express concerns. My advice is to communicate even unpleasant truths openly and in good time, as this is the only way to steer the change process in a targeted manner. It is important that the planned steps are communicated openly and that the subsequent actions correspond to the announcements. In this way, a basis of trust can be created and the workforce can be involved in the process.

Succession planning plays a decisive role in the value of a company and can also have a significant influence on a planned company sale. Here are some reasons why succession planning is so important:

Continuity and stability: Well thought-out succession planning ensures that the company can continue to be run in a stable and continuous manner even after the founder or previous owner has left. This creates trust among customers, employees, suppliers and other stakeholders and can maintain or even increase the value of the company.

Value of the company: A company that has a clear succession plan and is able to continue its business without major interruptions is often considered more valuable. Buyers or investors are often prepared to pay a higher price for a well-managed company. For smaller companies without a successor, the company value can approach zero.

Attractiveness for potential buyers: If a company is to be sold, the existence of a solid succession plan can increase the interest of potential buyers. They see this as less uncertainty and a lower risk for the future performance of the company.

Negotiating power: If a company has a clear succession plan and does not find itself in a critical situation due to a sudden change of ownership or a lack of managers, it can take a stronger position in negotiations with potential buyers or investors.

Time horizon: Good succession planning takes time to be successfully implemented. The earlier you start planning, the better. If an entrepreneur intends to sell their company in the next few years, it is advisable to tackle succession planning at an early stage.

In summary, it can be said that succession planning is of great importance for the company value, as it supports the stability, attractiveness and value enhancement of the company. It can also facilitate the transition to new owners or investors. Companies should view succession planning as a strategic measure with long-term benefits, regardless of whether a sale is planned in the near future or not.