Should I sell my consulting firm to an overseas buyer?

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By Gabriela Silvestris, Director, Equiteq

Overseas buyers can be an important target audience when looking to sell your consulting firm. Equiteq considers international acquirers for every M&A client and a large proportion of the businesses we have sold have been bought by overseas buyers.

Acquiring in desirable regions allows strategic buyers to gain quick access to lucrative markets, brands, intellectual property, local market knowledge, new clients and specific local expertise. As a result of this, overseas buyers may pay a premium to gain a market foothold.

To attract overseas buyers, it is important to demonstrate the attractiveness of local markets, market positioning and why the acquisition will be less risky and deliver a faster return than opening an office and recruiting local talent. To learn more about global buyer demands download our latest Buyers Research Report here.

M&A transactions need careful handling and cross-border M&A deals bring an array of additional challenges.

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How to handle an approach from a buyer – ‘Bid-defence’

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By Bruce Ramsay, Managing Director, Business Development, Equiteq

It is quite common for successful consulting firms to be approached by prospective buyers. In fact, our data suggests that a third of the deals we process come about from buyers approaching the client.

During a recent webinar, Equiteq Managing Director Bruce Ramsay answered questions from attendees on the subject of how to handle an approach from a buyer and what to do to maximize the opportunity from such an approach.

1. Will my business be worth more if a buyer approaches me, instead of going to market?

Your business could potentially be worth more if a buyer approaches you, as an incoming enquiry is an indication of proactive interest.

However, it is important to gauge the credibility of an unsolicited approach as soon as possible, as many are just ‘kicking the tyres’ and seeing if they can acquire an asset at a knock-down price. Understanding the buyer’s intention early on will help you understand whether this is an endeavor worth following up with or not.

Here’s what to expect from consulting firm buyers.

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Are you ready to sell? How to build buyer confidence

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To make the sales process as smooth as possible, it’s best that the buyer is not given any unwanted surprises. As the owner of one consultancy that you feel you know inside and out, it’s easy to forget that buyers may look at hundreds of potential acquisitions a year. Often at the first sign of something that concerns them they will simply move on to the next potential acquisition. To build their confidence and indicate to them that you are ready for a sale, there are several areas to consider.

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What do you do when a buyer approaches you unsolicitedly?

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It is not uncommon for thriving consultancies to be approached by a potential acquirer. However, many business owners fail to prepare for such an eventuality. This often leads to one of three outcomes, a bad deal for you, a mediocre deal, or a lengthy distraction over many months leading to nothing. These outcomes occur when savvy buyer meets first time seller, and only one buyer provides no leverage to the owner in carving out the best terms.

A company sale process is always time-consuming, stressful and emotional. There is a wide array of skills required that go way beyond your undoubted ability to sell high value, complex services to C level in top Fortune or FTSE companies. There are deal process skills that accelerate stages and conclusions while gaining maximum leverage, financial and synergy modelling skills that multiply value, and cool head skills that defend value and save a deal from collapse. Attempting to navigate this without expert support and while running your own business at the same time is usually false economy with high stakes.

Here are reasons why you should define your exit goals well ahead of a transaction.

How to approach your initial meeting

Prior to sitting down to discuss a possible deal with any buyer, there are a number of things and risks to consider before you start sharing information.

  • Who are you dealing with?:

It is vital to know the company you may be selling your business to. Immediately, find out if they have previous experience acquiring consultancies; how deep their pockets are likely to be; whether there is a possibility of cash up front in a deal. These are just some of the things that’ll help you know where you stand in a negotiation.

  • Seriousness of intent:

To avoid wasting your time, establish whether or not you are dealing with the decision-makers. So ascertain early on what their mandate and decision process is. You don’t want a situation where you have spent 6 or 8 months negotiating only to find that the CEO, whom you’ve never met, doesn’t like the asking price.

  • Competitive consequences:

If a deal falls through, consider what happens to all of the client details, strategy and financial information you’ve shared with the potential buyer. Think about how they may use this information if they go on to acquire a similar business. No matter the relationship you may have with an unsolicited buyer, get a non-disclosure agreement signed and DO NOT release any substantive information at the first meeting.

 

What you need to find out at the first serious exploratory meeting

Following your research, if there are any gaps in your knowledge of the above, they should be discussed in your first meeting with them, which should also cover the areas below.

  • What is their strategy and how do you fit in?

From the onset, request clarification on the strength of the company and the broad growth strategy of the firm you are about to join. It is important to determine where acquisitions fit in their strategy and the synergy value of your organization to the buyer.

  • Establish your criteria for a deal

Here, you’d want to know what type of deal the buyer is prepared to offer you for your business and where that fits with your financial and non-financial objectives. For instance, there is no point in continuing discussions if the buyer is unable to offer you a deal superior financially than the alternative of continuing to grow the business and equity value.

Also, many business owners have other non-financial objectives, such as how you and your staff will be integrated into the new entity. There have been instances where owners, used to entrepreneurial control,  have failed to integrate, preferring to walk away and relinquishing part or all of their earn out.

Unsolicited approaches are usually an exciting time for a business, but it is important to remember that there is also a lot at stake if you get it wrong. Don’t take the risk. Speak to an expert at Equiteq.

Click here for more tips on how to defend value in an unsolicited acquisition

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Equiteq sells Brazilian business process management consultancy

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We are pleased to announce the sale of W.G Systems LTDA t/a Habber Tec Brazil to GFT Group.

Founded in 2000, Habber Tec Brazil is part of Habber Tec International Group and Brazil’s largest IBM partner for business process management (BPM). The company focuses on the implementation and on-going support of BPM, big data, analytics and mobile solutions with a substantial footprint in the financial services industry.

The GFT Group is a german based strategic technology partner that helps companies optimise their business processes by providing intelligent IT solutions and highly skilled specialists. GFT develops, implements and maintains customized IT solutions and enables financial institutes to quickly and securely utilise modern technologies.

“Habber Tec Brazil adds further expertise in BPM integration and mobile solutions, especially in the fields of credit and digital banking applications. With this acquisition, the GFT Group will strengthen its Brazilian client base by adding renowned banks and further insurance companies” says Ulrich Dietz, CEO of GFT Group.

Gabriela Silvestris, Director in Equiteq’s London office, commented, “It has been an absolute pleasure working with the shareholders of Habber Tec Brazil. Their strong market position is underpinned by their key competencies in BPM, analytics and mobile solutions which address some of the major challenges banks are facing in the context of digital transformation”.

Fernando Arencibia Darias, shareholder of Habber Tec Brazil and Habber Tec International Group said “This movement is very important for the Group’s strategy in order to focus on our operations in Europe. We are very pleased with the outcome of the transaction and Equiteq’s support throughout. Gabriela’s professionalism and expertise was instrumental in structuring, negotiating and completing the deal”.

This sale highlights the current optimism in the consulting M&A market, as our Global Consulting M&A Report 2016 suggests.

Registering free for Equiteq Edge will allow you to access content and insight to help you prepare your business for sale or sell your business.