The acquisition of a small industrial company in Italy is a smart way to enter the European market. With a M&A deal the acquirer obtains industrial know how, product design competences, well known labels and talented managers used to international trades.
We will bring you the example of a foreign company that has recently concluded a successful acquisition on the Italian market with a small equity investment. The acquirer was assisted as financial advisor by EqS Equity Studio, a corporate finance boutique in Milano, Italy. The main steps of the project were the following.
Together with the people at EqS Equity Studio, the company discussed what characteristics of the target were considered key (the presence of a well known label in their industry, upper quality, good product design, wide international commercial contacts) and what other characteristics had to be avoided (large investments in real estate, redundancies in production facilities, poor product innovation, poor image). From the financial viewpoint the acquiring company set the amount that was willing to invest in equity in the acquisition.
Based on this Mergers and Acquisition “brief” the people at EqS Equity Studio prepared a market survey and identified a list of potential targets, with a short presentation on each of them that was discussed with the management of the acquiring Company.
We then focused on a short list of only seven targets. These targets were approached to investigate if they were interested in starting contacts in order to set up an international partnership, finally resulting in a short list of four potential Targets.
After one months we were ready to start with the real negotiations: we collected all the relevant information needed by the acquiring Company in order to evaluate in depth each of the Targets, both directly from the Targets and from publicly available information sources. We started meetings with the Target's principal shareholders and managers to understand with which Target we could find the best synergies.
The people at the Corporate Finance boutique in Milano counseled the acquiring Company on the appropriate values to be paid for the various Targets based on current condition on the Italian market and on a stand alone situation; possible synergy’s benefits to the acquiring Company were also discussed.
At the end we all agree on one specific Target. EqS Equity Studio of Milan counseled the acquiring Company as to the strategy and tactics for negotiating with the Target's shareholders, analyzing and suggesting the appropriate tax structure for the transaction based on the Italian legislation.
Once that an agreed structure of the deal was defined, we advised the acquiring Company on the most appropriate Transaction's legal structure, on the text of a Letter Of Intent and on the definitive purchase agreement according to Italian Law.
Additional services enabled the acquiring Company to minimize its risks and costs: the Financial Due Diligence helped in identifying the area of risks: the Corporate Finance boutique in Milano prepared a limited review of the Target's financial situation in order to identify cash flow projections for the following twelve months and to assess the main areas with potential financial risks to the acquirer.
The Mergers and Acquisition process required an accounting due diligence. With the Accounting Due Diligence an accounting review of the acquisition was prepared based on international audit principles. Finally a local Deal Financing helped in minimising the financial cost of the acquisition with a limited currency swap to cover from unnecessary FX risks. EqS Equity Studio of Milan prepared a review the various alternatives available to the acquiring Company to finance the acquisition of the Target and assisted the acquiring Company in arranging the financing of this investment.