Over the past several years, Mergers and Acquisitions (M&A) transactions have seen a notable acceleration. The driving force behind this? A phenomenon we know all too well: value creation.
Experts in mergers and acquisitions have the keen ability to identify untouched or underutilized growth potential within a company. As a result, they can bring their expertise to company managers and guide them through new developmental strategies.
Through the strategic use of mergers, managers can create synergies with other companies or discover new growth opportunities through financial routes.
Why do mergers and acquisitions create value?
Mergers and acquisitions specialists serve as matchmakers, connecting business executives seeking investment with those struggling to grow, or who are looking to sell their businesses to reinvest in more efficient ways.
These transactions stimulate value creation and synergies. Both parties share a common goal: to enhance efficiency and profitability.
Consider, for instance, a business transfer. The sellers part with their company, ensuring its continuity and growth. In this scenario, the M&A professional identifies a buyer with the necessary financial and professional wherewithal to ensure the company’s development. The buyer, in turn, acquires a company hoping to achieve a higher return on investment than other avenues, facilitated by synergies, economies of scale, and more.
Indeed, these transactions result in optimized asset use, better management of industrial shocks, rapid company growth, access to strategic knowledge and skills, and increased market share and entry barriers, all while reducing competitive pressure.
How do mergers and acquisitions create value?
The role of an M&A expert is multi-faceted. Starting with a blank slate, they might identify two complementary companies, X and Y, and propose a merger. Among five ideas, at least one will create value and jobs. Transaction opportunities often arise from the initiative of M&A experts, who guide investors to interesting deals, or directly from company managers. Mergers and acquisitions foster value because they aim for development and growth.
By acquiring a competitor, a company can increase its market share and hasten its growth without significant internal effort. These are often called “horizontal mergers“. A larger company may decide to acquire a smaller competitor, expanding its product portfolio and production capacity, while the smaller company benefits from the larger company’s distribution network.
Alternatively, a company can cut costs by purchasing one of its suppliers or distributors, thereby increasing its negotiating power in the value chain. For instance, if a company acquires a supplier, it can save on supplier margins, a situation known as a “vertical merger”. Conversely, if a company purchases a distributor, it can reduce transportation and delivery costs.
In general, a transaction is considered value-creating when the combined value of the merged entity surpasses the sum of the value of the two separate entities. Operational and financial synergies and new cost structures that emerge from the merger often enhance value and performance.
However, success is more likely when executives rigorously prepare, implement, and execute these plans. That’s why many turn to M&A experts for guidance in preparing for such transactions. From an investor’s perspective, employing a “real specialist” improves the odds of persuasion.
How do mergers and acquisitions help companies grow in times of crisis?
In challenging times, a proactive external growth strategy is advisable for coming out ahead. Experts often recommend external growth operations as strategic actions to quickly assess one’s position.
In such scenarios, companies with targeted M&A strategies are more likely to capitalize on the situation. Indeed, one way to maintain growth during a crisis is to collaborate and become more efficient. This can be achieved by combining two competing companies that serve the same market or sell similar products, merging two companies involved at different stages of the supply chain for a common good or service, or even between two companies with no production or market links.
This type of growth involves a total or partial acquisition, through various means, of shares in a company, thus acquiring assets that are already combined and organized, ready for operation. These can be viewed as restructuring tactics for groups to redeploy tangible and intangible resources and to distinguish between the most and least profitable entities. Their primary goal is the realization of synergies, which often hinges on the new entity’s ability to unlock untapped savings across various functions.
Indeed, the merger of two companies can lead to reduced production costs, which is economically advantageous. This implies there are efficiency gains. Depending on the company’s strategy, prices can be lowered to capture market share, or they can be raised as the number of market players decreases and a dominant market position becomes feasible, depending on the sector.
FAQ
What services does Actoria provide?
Actoria specializes in mergers and acquisitions advisory for small and mid-sized businesses. Our services include company sales, succession planning, buy-side and sell-side mandates, business valuation, financial diagnostics, investor sourcing, negotiation support and full transaction execution until closing.
Who does Actoria work with?
We support SME owners, family-business leaders, shareholders, entrepreneurs, private investors, and corporate groups seeking to acquire or divest businesses in Europe and North Africa.
In which countries does Actoria operate?
Actoria has local teams in Switzerland, France, Belgium, Luxembourg, Morocco and Tunisia, and manages cross-border deals across Europe, Africa and the Middle East through an international buyer network.
How many potential buyers are in Actoria’s network?
Our proprietary network includes more than 6,500 qualified industrial buyers, strategic acquirers and financial investors, allowing us to match sellers with high-quality counterparties.
Does Actoria support confidential business sales?
Yes. Confidentiality is fundamental to our process. All discussions, documentation and buyer approaches are handled discreetly to protect the interests of the seller and the business.
What industries does Actoria cover?
We advise companies across multiple sectors, including industrial production, manufacturing, services, IT and digital, healthcare, logistics and distribution, construction, and specialized B2B services.
What is the typical size of businesses Actoria represents?
We primarily advise SMEs with revenues generally ranging from CHF/EUR 2 million to 100 million, depending on jurisdiction and market.
How does Actoria determine the value of a business?
We perform detailed financial and strategic analysis using multiple valuation methods, including discounted cash flows, market multiples, asset-based methods, and sector benchmarking.
How long does a business sale process take?
A standard transaction typically takes 6 to 12 months depending on market conditions, buyer interest, company complexity and diligence requirements.
Why choose Actoria as an M&A advisor?
With over 20 years of experience, a senior advisory team, a structured methodology, and an extensive network of qualified buyers, Actoria delivers independent advice, tailored execution and strong transaction results for SME owners.
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Actoria has swiftly identified the inefficiencies in our company’s processes, proposed optimizations, and implemented them effectively. Furthermore, Actoria has provided outstanding support throughout all stages of our company’s transfer to a group within our industry. This includes preparing our company, identifying potential buyer partners, and negotiating up to the point of the partner’s capital entry. Actoria delivered expert negotiation skills and secured a valuable partner for us.
We were quite anxious to find a solution, as my health was deteriorating rapidly. Actoria’s consultant played a crucial role in the successful completion of my company’s sale. Their involvement was essential in executing this delicate project, as it impacted our daily operations. This project, which was close to my heart and increasingly necessary, was made possible thanks to the decisive momentum provided by Actoria.
First, Actoria conducted a thorough assessment of our company’s strengths and weaknesses, and then suggested incorporating these insights into our management approach to enhance our company’s value. Actoria led this project alongside my entire management team, enabling the involvement of all key personnel, and swiftly implementing a solution that allowed an investor to enter our capital. This was complemented by the inclusion of some of my company’s executives and a bank.
I couldn’t be happier with the result, but I am especially pleased with my decision to work with Actoria. The success of this mission was the direct result of Actoria’s hard work and sophisticated professionalism on my business. From our first meeting through the reasonable preparation process, all phases of the transfer, legal and financial operations were managed by the Actoria team. Their skills were even more evident when the complexities of this transaction were at its peak.
Hiring Actoria made the difference to achieve my original goal and move on to my next professional challenge. Selling a company like AMR in this market has not been an easy task. Actoria has demonstrated perseverance in identifying good buyers with knowledge of my industry in order to continue the development of my business, and has provided professional advice throughout the process.
The company’s sales process was a lengthy and challenging journey. The professional support from Actoria made this endeavor much more manageable. I would like to extend special thanks to the consultants from Switzerland and France for their highly effective collaboration. Your consultants proposed creative solutions during the negotiations, which effectively overcame significant obstacles in order to finalize the agreement. Their experience, knowledge, and professionalism played a crucial role in the success of this transaction.
Leverage in the context of a holding company