The interest rate turnaround in the M&A business
The days of cheap money are over for now. The rise in interest rates is being felt everywhere. Major investments are being reconsidered several times over, and banks are demanding greater added value in order to cover the required debt service. Investments in the form of company acquisitions are not exempt from this and are considered separately by banks. Financing your own company, which is already known to the banks, requires less persuasion than financing a company unknown to the bank.
Transaction financing as a stumbling block in the process
To avoid delays during the M&A process, communication with banks must be addressed at an early stage. Unclear financing not only delays the process, but in the worst case scenario, it can also scare off a seller. As the process becomes more concrete, discussions with banks should also become more targeted. This allows documents required by the bank to be requested at an early stage, which can speed up the financing decision.
Integrated financial planning to secure financing
Integrated financial planning often serves as the basis for a bank’s decision to grant financing. This involves simulating the profit and loss statement, the balance sheet, and liquidity, which fully represents the company’s financial situation after the acquisition. This requires a sober and realistic assessment that enables the financing partners to make a decision. This planning must be carried out in close cooperation with management so that synergies can be identified and realistically assessed.
Strategic fit for strong synergies
In such an interest rate environment in particular, added value through the achievement of synergies is essential to make the investment in an acquisition worthwhile. By realizing cross-selling potential, cost savings, or the logistical development of new markets, the merged company is better able to service the debt from the transaction financing. In this context, defining the transaction strategy and conducting a targeted search for suitable targets is essential in order to lay the foundation for a successful transaction and integration right from the start of the process. A variety of different factors must be taken into account, such as the geographical location, production capacities, product fit, financial structure, and corporate culture of the target.
Added value through comprehensive consulting
A significant competitive advantage of the i-unit group is its coverage of a broad spectrum of consulting services. The entire M&A process can be accompanied by experts from i-capital, who already look for synergy potential when searching for targets, thus laying the foundation for significant added value in the transaction. When creating integrated financial planning, colleagues from the Financial Planning and Analysis department provide support with cross-industry expertise, models, and specialized software. Raising finance is part of the remit of i-strategy, where employees with banking experience provide expert support in selecting and communicating with banks and act as sparring partners.
Philip Herrmann
Partner, i-capital
+49 151 143 396 02
