Alternative financing for your company

To be able to realize your plans as an entrepreneur, you generally need financing. It appears that there is enough money available at the moment. But still, the right financing is sometimes difficult to find. Banks do not give at home and other financiers are often difficult to find on the internet. Ever considered alternative financing?

Everyone is familiar with bank financing. These include, for example, the bank guarantee, the bank loan, factoring and debtor financing, the mortgage loan, credit insurance and leasing. But what are alternative methods for fulfilling a financing requirement? Below we describe a few.

Strategic partner

We start with the strategic partner. This partner can be either an organization or a person. Consider, for example, a private equity firm. These organizations manage the assets of investors and investment funds in a fund. Private equity firms obtain a share in a company. This way, they can contribute to the growth of the organization with the help of their experience, network and knowledge. In addition, there are so-called business angels. These are often former entrepreneurs who act as informal or private investors. Just like private equity firms, they help organizations grow with the help of their experience, network and knowledge. A business angel fits best with a young, starting company, while a private equity firm generally fits in better with a company that has been around for a while.

Leasing

In addition to leasing through a bank, there are numerous organizations that offer leasing for company assets, such as company cars, machines or computers. Leasing takes the forms of operational lease, financial lease and private lease. In the IT industry, another, often less well-known form of leasing is emerging. With these lease contracts, it is not the asset (the car, machine, etc.), but the cash flow that forms the collateral for the financing. These parties are willing to finance multi-year contracts with a fixed income stream.

Direct lending

Direct lending is a loan form without the intervention of a bank. This is achieved through funds and financing portals. These funds provide (often subordinated) loans to organizations. In the case of bankruptcy, the other creditors have priority. This form of financing is suitable for organizations that cannot obtain additional financing from a bank, but do generate sufficient cash flow and make a profit. In addition to these funds, you can go to online financing portals for direct lending. The application, the assessment and the payment can be realized quickly. A financier provides a loan for, for example, online credit or online working capital.

Reverse factoring

Reverse factoring is a specific way of factoring and is also referred to as chain financing. Especially companies that do business with large organizations that have long payment periods can benefit from this form of financing. With reverse factoring you receive a payment guarantee from the buyer for the approved invoices. Thanks to this guarantee, the factor can advance the invoice. This means you don’t have to wait a long period of time to receive the money, because the payment period at these large organizations can run up to more than 120 days. An additional advantage of this form of financing is the lower interest rate that the factor charges on the amount advanced. This is because the large buyers in most cases have a high credit rating. As a result, the risk factor is lower which in turn lowers the interest rate.

Crowdfunding

With crowdfunding you raise money with the general public. This can be done in various ways. The most common forms are loans, convertible loans, shares, donations, donations with non-financial consideration (for example a product or service) or combinations thereof. A point of attention is that these different forms have different tax consequences. This is something to take into account.

Do you have a financing request? Or are you curious about which form of financing is most suitable for your current situation? Feel free to contact us to see if we can do something for you. Our contact details can be found here.

Merger & acquisition III – The integration

You did it. You have found a great company, there is a good click, and the acquisition has been completed. Now it’s time for the next step. It is important to properly integrate the company into the existing organization. Before the takeover you have looked carefully at the opportunities and which synergy can be realized. Time to use those possibilities and opportunities. Experience shows that the first 100 days are of great importance. In short, time for action. In this blog a number of points for a good start on the integration of acquired company into the existing organisation.

Attention

The integration process is complex. It provides a considerable amount of stirring for both the acquiring party and the acquiree. Employees may wonder if they can stay, and management faces the challenge of achieving the right synergy. Research shows that attention to cultural differences, proper planning, clear communication and attention to staff are important to make the acquisition a success.

The right team

Integration can be seen as a project. It requires a project-based approach with an associated (project) team. Experience shows that a number of things are important.
Firstly, correct team composition is important. For example, a certain seniority in the team is required, so that they have the upper hand when taking unpopular measures.
Secondly, the objectives must be clear to both organizations. In this way both parties work towards the same goal.
Thirdly, monitoring performance is important. This may be a bit tricky in the beginning, but it is advisable to start immediately after the acquisition. As a result of an acquisition, for example, you operate in a larger market or even in a new market. There are often slightly different rules and trends here than you are used to, so make sure you keep an eye on this.
Fourth, no integration process is the same. There will be things that don’t go as planned, while some things run much smoother than expected. Learn from the mistakes and enjoy the successes. This not only helps with the current integration process, but also with possible subsequent acquisitions in the future.

Communication

Perhaps the most important aspect during a merger or acquisition process is communication. This starts from the moment of the announcement of the impending merger or acquisition into the integration process. Make sure you communicate clearly with all parties involved. These are turbulent times that cause uncertainty among stakeholders, employees and suppliers. Involve everyone in the process and communicate clearly which steps will be taken. Tell how, and which “milestones” have been achieved during the process. This way, you ensure that every stakeholder remains involved in the process and the integration process is speeded up.

Value creation

Value creation actually begins from the moment the integration starts. Synergies can be achieved immediately by, for example, integrating certain functions or business units. In addition, both corporate cultures must also be examined and the existing and new staff must get to know each other. Pay attention to matters such as working conditions, diversity, openness, work pressure and the style of leadership within both organizations. You may have access to larger or new markets thanks to a merger or acquisition. Or maybe there are new products that you can offer. You can create new product-market combinations. This way, existing or new markets can be explored.

Conclusion

Based on the findings in our triptych we can divide a merger or acquisition process into three different phases, namely the search, the transaction and the integration. It starts with searching for the perfect match. Have you found the right candidate? Then contacting, negotiation and finally the transaction takes place. After this, the actual value creation starts with the integration. That is why it is important to give the integration process just as much attention as the two previous phases.

Are you looking for a company to take over? Or maybe you are about to sell your business? Feel free to contact us to see what we can do for you. Our contact details can be found here.

Merger and acquisition II – The transaction

You have found a company that suits you well and that you would like to take over. How do you proceed? To make this clear, you must ask yourself specific questions such as: What is the best way to make contact? Who is the best person to approach and which questions do I ask? Do I cut right to the chase or do I first establish a good relationship? In this part of our blog series called ‘merger and acquisition’ we will take a closer look at the transaction.

In this blog we provide answers to these questions based on our own experiences. We have subdivided these answers into five phases.

Phase 1 – Acquiring knowledge

Everything starts with a good basis. It is therefore of great importance to form a clear image of the company to be acquired at the start of the acquisition process. This preparation helps you to:

  • Understand the interests and wishes of the shareholders
  • Gain insight into the company’s strategy
  • Learn about the company’s strengths and weaknesses
  • Gain insight into the financial results and expectations of the company

Based on this gathered knowledge you make a trade-off on how to actually contact the relevant company.

Phase 2 – Making contact

A number of things are important when making contact:

  • Finding the right person. This is often the managing director or one of the shareholders.
  • Who will approach this person? This can be someone from your own company, but in some cases it is inconvenient to immediately show who the interested person is. In this case, hiring an intermediary works best.
  • What is the message that you want to deliver?

Thinking about these topics beforehand helps you to increase the chance of success. After making the first contact, a period of becoming acquaintance often follows. Our experience is that a party often finds it very pleasant to hear that there is a potential interested party, but that in the first instance they are not open to a sale of the company. Then, it is important to maintain contact. The moment a change in this situation occurs, you are the party that they will approach first. In practice, this process requires a long-term focus that is primarily about deepening the relationship.

Phase 3 – Negotiation

Once the other party is willing to discuss a takeover, the next step is the collection of information. This information is needed to verify whether the assumptions made about the company in advance are correct.

Based on this information you can determine what you would like to pay for the company. You do this by drawing up a company valuation, after which the negotiation phase starts.

In addition to the acquisition price, there are various matters that the parties must agree on. You can think of guarantees such as:  does the management of the company to be acquired remain involved, is the purchase price paid in one lump sum or in parts, etc. All these matters are recorded in a so-called letter of intent.

Often people do not realize that it is important, for all parties, that the buyer should also have something to offer the company to be acquired. Only then can a company takeover be successful. In addition to a good price for the company, this offers the company a solid future after the acquisition, because they can grow further with your help.

Phase 4 – Due diligence investigation

It is of importance to make a good estimation of the risks and the reliability of the information about the company to be acquired. As a buyer, you want to look into the administration and get a better view of the business risks. We call this a due diligence investigation. Such a study focuses on financial matters, taxes, legal aspects and possibly also on the market. To make this possible, a so-called data room is set up by the seller. This data room contains the most important information about the company. In most cases this is a digital environment in which the required documents are made accessible. Filling the data room with contracts and other information will have to be done by the selling organization. In order to gain access to this information, beforehand a non-disclosure agreement (NDA) must be signed.

Phase 5 – Completing the transaction

Once the due diligence investigation has been completed, a purchase agreement will be drawn up. The details that emerged during the due diligence investigation are further specified and the agreements made are recorded. This purchase agreement generally includes items such as:

  • Guarantees regarding the financial statement
  • Safeguards for specific risks
  • Non-competition clause

In addition to the purchase agreement, there is a formal transfer. This may involve a transfer of shares or the transfer of assets and liabilities. The actual transfer of shares takes place via a transfer deed that passes at the notary.

In our next blog we will discuss the process of integrating the acquired company in the existing organization.

Are you looking for a company to take over? Or maybe you are about to sell your business? Feel free to contact us to see what we can do for you. Our contact information can be found here.

Merger and acquisition I – The search

Do you ever think about ​​taking over a company or maybe merging your company with another one? Many entrepreneurs find this idea exciting. We all know the stories that, in reality, things are going a little bit differently than expected. We will take a closer look at this process in our blog series called ‘merger and acquisition’.

In our ‘Mergers and Acquisitions’ trilogy, we discuss the steps within the merger and acquisition process. We have subdivided these steps into finding the right companies, the transaction and the integration process. In the blog “Merger and acquisition I – The search” we will go deeper into searching (or finding) the right company.

The right company

In our blog ‘How do you find the right company to take over?’ we described the first steps of finding the right company. It is important to have a clear picture of where you want to go as a company. In practice, the chance of success increases when you start with what you can add to the other party. In many cases, companies only look at what they can gain from the other party. Unfortunately, this often leads to failure. It is therefore important to establish a clear business profile and to identify the potential risks.

The search

Have you completed the first steps? Then the real search begins. But how do you do this? You can already make a nice selection based on the company profile you established. However, only a company profile is not enough to find that perfect match. In our blog ‘6 tips for a company takeover’ we explain that it is also important to get a good feeling about the company you plan on taking over. Consider, for example, the corporate culture and which people have important positions within the company.

On offer

Many companies are offered for sale. This seems very interesting, because there is a lot of choice. But sitting back and waiting for companies to come to you may not be the best strategy. The competition is not standing still and may be in the market actively looking for companies to take over. There is a good chance that the companies with the greatest potential have already been taken off the market. It is therefore wise to take a bold step and examine the market yourself.

Act proactively

A study by the international management consulting firm McKinsey & Company (which can be read here) has shown that companies that are actively looking for companies to take over perform better than the competition. Especially when there are several smaller acquisitions, the economic result increases significantly. Companies applying a structured acquisition strategy achieve considerably better results. The more often a takeover takes place, the better you get at it. As a result, both the efficiency and effectiveness of acquisitions will improve significantly over time.

A professional party with experience in this area can assist with both sales or purchases. Are you looking for a company to take over? Or maybe you are about to sell your business? Feel free to contact us to see if we can do anything for you. Our contact information can be found here.

I never could have made this deal on my own

When Peter Overbeek is CEO of label printing office Eshuis for more than 20 years and owner of 30 percent of the shares, the major shareholder passes away. Peter is given the opportunity to take over the rest of the shares. The problem is that Peter does not know how much the company is worth. How to conduct the price negotiations for this deal. And how he could finance taking over the shares and real estate at all. That’s why Peter brought in Stratfield’s help. “I was not just looking for a professional company with knowledge, but also an honest, dedicated and loyal partner.”

The challenge of Peter Overbeek

Peter: ‘An entrepreneur wants to do business. So when, after major shareholder Peter Eshuis passed away, I was able to get hold of all the shares, I was interested in that. As the sole shareholder, I can more easily take the steps that ensure the continuity and growth of this wonderful company. Unfortunately, I simply did not know if it was financially feasible to take over the shares. That is why I asked Leendert Stam from Stratfield to make a financial calculation. Based on the annual figures and the long-term plan of Eshuis, the value of the company was analysed. He also calculated that I could finance this amount with the help of an external party and a bank loan. Based on this information I have entered into an acquisition process with Stratfield.’

The approach of Stratfield

‘First of all, Leendert and Richard conducted the meetings for me with the representatives of the Eshuis family. Stratfield negotiated the value of the shares. And when it turned out that the contact with the selling party went a bit stiffer than expected, Stratfield linked me to an excellent lawyer who supported me legally. We made a settlement agreement with the family in May 2018, defined the purchase price of the shares and finished the negotiations about the real estate of the company. Last December I officially took over the shares and on the 1st  of April this year I bought the real estate.’

The search for the suitable financier

‘All this was only possible because Leendert and Richard brought me into contact with the Wadinko investment company. I could only finance the acquisition of the shares and real estate with the help of an external party. That is why Leendert and Richard spoke at an early stage with various banks, subordinated loan funds and private equity houses. We came to the conclusion that Wadinko was the most suitable party to make the transaction a success. Also because Leendert knows this investment company well and knows that Wadinko and Eshuis fit together perfectly.’

Negotiations for the perfect deal

‘’After our first presentation at Wadinko, it turned out that Leendert was right. There was indeed a good click. Wadinko supports my ideas, reinforces my aspirations and the good reputation of Wadinko makes our company more sustainable, better and more solid. The cooperation with this reliable partner ensured that a bank loan could be obtained to finance the takeover. In short, cooperating with Wadinko was the best option for Eshuis’s continuity. Therefore, it feels good that this party has become my partner and became the owner of 40 percent of the shares. Stratfield sharply negotiated for me to make the perfect deal with Wadinko.’

Working as a close team

‘If I look back at the acquisition process and the cooperation with Stratfield, I can conclude that the successful acquisition of the shares and real estate is based on mutual trust. Richard and Leendert conduct business professionally, skilfully and think along with me. They are solution-oriented, approachable, hands-on, engaged and very reliable and loyal. The fact that we have completed the entire process without a cooperation contract says enough to me. We operated, along with the lawyer, as a close-knit team with the same goal in mind. We discussed a lot, coordinated all the steps to take and made the right decisions in different exciting stages. With success, because thanks to Stratfield I entered into a partnership with Wadinko. Now I can take new steps with Eshuis towards a bright future. ”

About Eshuis

Label printing office Eshuis, based in Dalfsen, specializes in customer-specific printing and post-processing of self-adhesive labels, flexible packaging, sachet films, wrap-around labels, shrink sleeves and cheese labels. Eshuis works for food and non-food clients such as Heineken, Grolsch, Beaphar, Go Tan, Wijzonol, Swedish Match Lighters and Coca-Cola.

Establishment: 1891
Number of employees:  more than 125
Estimated turnover in 2019: 20 million euros

For more information about label printing office Eshuis, visit www.eshuis.nl.

For Peter Overbeek, Stratfield has:

  • Calculated the financial feasibility of the acquisition of shares;
  • Discussed with the selling party;
  • Negotiated about the purchase price with the selling party;
  • Provided the desired legal support;
  • Searched for and found the most suitable financier;
  • Conducted negotiations on the cooperation deal.

Are you curious if we can do something for you? Our contact information can be found here.

How do you find the right company to take over?

Do you have the ambition to take over a company, but are you afraid of making the wrong choice? How do you find the right company to take over? We share a number of tips to find the perfect candidate for your acquisition.

Find the right company to take over

By taking over a company you get the opportunity to grow faster. Your company gains access to new products, services and knowledge. It can give a huge boost and distinguish your company from the competition. But it is important that you make the right choice in which company to take over. How do you ensure that it is a good match? We give you a number of tips.

Where are you and where do you want to go?

First of all, it is important to have a clear idea of ​​what your own organization stands for. What core values ​​does your company have that you want to keep and what do you have to offer the other company? Map for yourself which way you want to go in the coming years. What do you want to show to the outside world and what do you want to offer the customer? For example, do you want to expand your business by offering services in addition to products or do you want to add a new product group? Create a clear ideal image for yourself.

What do you have to offer?

An acquisition comes from two sides. You will have to assure the other company that you can create something valuable together. Think in advance how far you want to go to cater the other company. Set your own limits in advance. For example, it is important to think in advance about a maximum acquisition sum. It is even more important to think about the possibilities that you can offer the other party. Think of means of production, network, reputation, knowledge and foreign branches.

What do you need?

The next question is: what do you need from someone else to achieve your goals? Make a clear profile of your wishes. Describe well how far your knowledge and skills go and where this should be supplemented by the company to be acquired. Sometimes it is quite difficult to explain what your company needs to grow further, but try to figure this out before you start your search.

Put together a company profile

Ask yourself what type of company you would like to take over. Create a clear profile. In which sector are you looking? Is region important to you, and if so: which one? What size should the company have? Are you looking for a fast or slow growing company? And which corporate culture fits your company? Also delve into the products, services and markets of the companies that you might want to take over. This can provide new insights and help to get a more specific picture of who can help you further.

What are the risks?

There are always risks associated with a takeover. It is therefore important for you to know whether the company you are taking over is financially sound and where the growth opportunities lie. By getting to know the market in which the company operates, you get to know the pitfalls. In addition, it is good to get to know your new competitors and to investigate what is currently going on within this industry.

These were our tips in our blog ‘How do you find the right company to take over?’. Do you need professional advise? We at Stratfield are happy to help. With our large network of companies we can help you find the right candidate for your takeover! You can contact us here.

 

How alternative business models can add value to your company

Only think about a business model when you start a business as a starting entrepreneur? Not really! More and more progressive business models are emerging that ensure that you continue to grow as a company in the future. In addition, it is important to be clear about what your company’s business model is, so that it is clear to everyone how the company creates, delivers and retains value.
A company takeover is therefore the perfect opportunity to take a critical look at your own business model. Are there new opportunities, competition, risks and potential customers that do not fit within your current business model? Are there companies that serve the market in a different way?
But how do you know which business model might be interesting for your company? Below we make a distinction between seven variations on how alternative business models can add value to your company.

 

1. Peer-to-peer
Peer-to-peer often involves online platforms on which people can offer and borrow products themselves. These are often expensive products that are not often used that can then be borrowed for a small amount. As a company you facilitate this loan construction. Peer-to-peer is widely used for tools, among other things. An important aspect for the success of this model is the distance, it must be small. Otherwise the step is too large to borrow the product.

 

2. Open prices
With open prices you give the customer the opportunity to value your service and to attach a price tag to it. It is therefore very important in this model to build a  strong relationship with your customer. Another option is to provide part of your services for free in order to create goodwill. An advantage of an open pricing strategy is that you gain a great deal of insight into the appreciation of your customers and you can respond well to your strengths and weaknesses in your business.

 

3. Earn from the non-core business of others
Dive into the opportunities that other companies leave out. Can another company not offer a certain service because they prefer to focus on another part of their company? Jump in! There is a lot of demand right now. This is your chance.

 

4. Crisis model
This model is based on your original business model, only cheaper. As a company you produce a cheaper version of your existing product. Here you not only address a new target group, but they also become familiar with the product. Because of this, they are ultimately more willing to pay more for the more expensive product, because they have already had a positive experience with your company.

 

5. Mobile services
This model is also based on your original business model, the only difference being that this service can be performed on location. Then apply this to completely new sectors, so that you can reach new target groups.

 

6. Lock-in model
Creating a lock-in can be a deliberate or unconscious strategy to keep customers committed to you. With this model you ensure that customers cannot switch to another provider for a certain product or service without incurring too high costs. For example, for a long time you could only use the Nespresso cups in their coffee makers.

 

7. Circular economy
With this model you do not sell the product itself, but the use thereof. Certainly not a new phenomenon. We already know, for example, leasing cars or coffee machines in offices. What is innovative is that it is increasingly being applied to products that you do not expect. Such as carpet tiles and clothing. This way you use what is already there and you spend less money on raw materials. In addition, it also saves the environment.

 

In short, it is a good time, right now, to take a different path with your business plan. To not only look at what you as a company are currently earning money from, but also at how you can continue to do so as a company.

 

These 7 variations explain how alternative business models can add value to your company. Looking for other ways to add value? Read about it in this blog.

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Doing business ‘beyond the hockey stick’

Analysing the 2,400 largest companies in the world over a period of more than 10 years. The writers of the book “Strategy Beyond the Hockey Stick” and McKinsey advisers Chris Bradley, Martin Hirt and Sven Smit did this to find out the key to economic success. What makes one company more successful than another? How do you achieve doing business ‘beyond the hockey stick’?

This research shows that a large part of these companies had a comparable profit level. For example, 60% of these performed on average. There are two groups of 20% that deviate significantly from this. These are the poor and the top performers. The researchers found several reasons why some of the companies deviate positively from the average of the majority of companies. These reaseons are:

  • Structured M&A
  • Dynamic allocation of resources
  • Above-average investments
  • Efficient production
  • Differentiation of the organization

Structured M&A
The majority of M&As (mergers and acquisitions) do not realize any added value, which is a shame. Do you want to ensure that your M&As do pay off and that you achieve your strategic objectives? Then ensure a structured M&A strategy. In order for the integration of your companies to succeed, you need a clear goal, strategy, organization and culture. Because of this structure you achieve your goals faster and the return increases.

Dynamic allocation of resources
The use of money, talents and the attention of management in the places where they add the most value. The McKinsey study shows that management does not know where, how much and how they can re-allocate. This can be done in four different ways:

  • Avoid averages. Look carefully at the different numbers. This can, for example, differ greatly per location or department. Ensure to take this into account while allocating resources.
  • Focus on value creation. Use the right tool to always be able to assess where the resources are going. This can be the expected profit that you divide by the financial resources you need to make the profit.
  • Facts and logic. It can be difficult to turn past performance into a success or to improve it. Even more difficult is to pull out the plug as soon as things do not get better. But sometimes that is the start of success. Therefore, base the allocation on facts and logic and not on hope or trust.
  • Be dynamic. Resources must be adjusted regularly. This may be due to certain events that make it necessary, such as the sudden decrease of the oil price in 2015. The allocation of resources should not be done once a year, but must be an ongoing process.

Above-average investments
What is also noticeable with the top performers is that they invest above average. This is about more than just money. Successful organizations also invest in intangible added value to grow the business. Consider international presence, the production process, customer relationships or the service departments.

Efficient production
McKinsey also sees that companies that achieve above-average returns have efficient production. The continuous improvement of efficiency in order to reduce the cost price and reduce the working capital is therefore a spearhead of management. Because this increases the return on total invested capital.

Differentiation of the organisation
Companies that use M&A in a strategic way to grow will probably achieve a higher return on their assets in the long term.

An important observation is that many companies look at their own organization when formulating the strategy. This is also called the ‘inside view’ by the writers. This ‘inside view’ is often subjective and is not well substantiated. With such a strategy, management wants to keep everyone happy because it is risk-avoiding and has vague prospects.

Based on the research, it is therefore important to look at how you, as an acquiring organization, can add value in a strategic way. Both materially and immaterially. That makes one company more successful than another.

 

Doing business ‘beyond the hockey stick’ requires making certain ‘moves’. Looking for more ways to grow your business? Read about it in this blog.

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Stratfield Corporate Finance expands!

Stratfield Corporate Finance expands!

Since the 1st of April Erik Baks is working at Stratfield. With his Master’s degree in Strategy, Finance and Risk Management in his pocket he is ready to go into the field. Solving complex issues and performing data analyses. That is Erik’s passion. Exactly what Stratfield was looking for.

Recently, the number of assignments at Stratfield has grown considerably. More and more often these tasks are about guiding strategic takeovers. Finding the right companies requires a lot of research and analysis. Erik feels completely at home here. At Stratfield he can turn this passion into his work.

In addition to his regular duties, Erik is also busy publishing his graduation thesis. This is a study on the effect of gender diversity in boards of directors on company performance in the technology industry. More on this later.

 

Curious if Stratfield Corporate Finance can do something for you? You can find our contact information here.

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This way you ensure a successful acquisition

Harvard Business Review, 2016
‘’M&A is a mug’s game’’, said Roger Martin in the Harvard Business Review magazine. He refers to the fact that 70% to 90% of the acquisitions fail. Acquisitions are a tempting strategy for rapid growth as an organization. In addition, it often gives the management a good feeling psychologically. But then you have to do it well. And how do you do that? Read about it in this blog ‘This way you ensure a successful acquisition’.

Why does it fail so often?
To begin with, it is good to look at why it fails so often. The answer to this is that organizations often look at the profit to be achieved. This can vary from access to a specific market to obtaining knowledge. Often it is not looked at what the organization can add to the company that is being acquired. You are probably not the only one who sees an opportunity when a company is offered for sale. The value of this opportunity is lost in a bid. The price goes up so that the payback time increases or may become impossible.

How does it work?
Find ways in which you can add value to the acquired organization instead of just making a profit out of it. Buyers tend to look only at what the company that is being acquired adds to their own organization and not look at what they have to offer to the acquired company. In fact, by ‘bringing’ you make the difference between a successful or failed takeover. There are different ways for this:

  • Give the company growth capital
  • Make sure they can focus better on their ambition
  • Transfer one or more important competencies
  • Share one or more important means of production

Give the company growth capital
As an organization, you can add a lot of value if you understand the company that you want to take over and the industry in which it operates. Creating value by investing only financial capital in the Netherlands is mainly done by so-called private equity funds. Their business model is to grow businesses through growth capital and good support.
For example, Euro in Nijverdal has been given the opportunity to invest in efficient production through capital, knowledge and management support from the investment company Wadinko.

Make sure they can focus better on their ambition
Another way to add value to a company is to ensure that employees can focus on their ambition within the company. How? By creating more insight and overview for all employees. Which direction do you want to take with the company? Which process policy is needed for this? Why are these changes needed to grow the organization?

Transfer one or more important competencies
It can also be very valuable to transfer specific, often functional, competencies to the other company.
A good example of this is the acquisition of TDC, EME-Engel and Tricas by ITMGroup. Through the acquisition, these companies bundled their knowledge and opportunities to become world leaders in the detergent sector. ITMGroup applied their technology and knowledge of the tobacco industry to a completely different industry. This made possible that a small player like EME-Engel is now a valuable supplier for multinationals in the detergent industry. And ITM is now the first ready-made supplier in this industry, because TDC adds its packaging technology to it. Tricas supports this by developing new, better and safer water-soluble capsules with detergent.

Share one or more important means of production
The fourth way to add value is to share one or more means of production with the company you take over. bpost shared important means of production of its own with De Buren. This allowed them to grow quickly at De Buren with their unmanned collection points in Belgium.
In this form of ‘giving’ it is important that you understand the underlying dynamics of the company that is being acquired and that the resources are actually shared with each other.
It is therefore important that you have a strong and clear strategy for an acquisition, even if the market does not ask for this. And even more important: what you add during this acquisition determines the value that comes out of it. This makes the difference between a successful or a failed takeover.

This way you ensure a successful acquisition. Want to know more about how to make an acquisition succesful? Read our 6 tips in this blog.

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