Presentation is loading. Please wait.

Presentation is loading. Please wait.

PRECISE. PROVEN. PERFORMANCE. © 2011 Moore Stephens LLP Acquisition process in Europe Duncan Gregory Structuring Kathy Gillen 23 September 2011

Similar presentations

Presentation on theme: "PRECISE. PROVEN. PERFORMANCE. © 2011 Moore Stephens LLP Acquisition process in Europe Duncan Gregory Structuring Kathy Gillen 23 September 2011"— Presentation transcript:

1 PRECISE. PROVEN. PERFORMANCE. © 2011 Moore Stephens LLP Acquisition process in Europe Duncan Gregory Structuring Kathy Gillen 23 September 2011

2 Agenda Introduction to Moore Stephens Acquisition process in Europe –Duncan Gregory Structuring –Kathy Gillen

3 Introduction to Moore Stephens Established in London in 1907 (Jersey: 1968) Strong financial and operational resources: one of the worlds largest accounting networks Focus on long-term relationships and adding value Wide range of skills and sector disciplines Committed to using the right people on every assignment Substantial international experience Proven track record Dedicated India desk in London

4 Locations WorldUK Countries Offices Principals and staff Turnover ,864 $2.1bn ,551 £138.8m India 1 21 n/a

5 Overview of our services Audit and accountancy Business Support and Outsourcing Corporate Finance (Duncan Gregory) IT Consultancy Taxation Trust and Corporate Services and International Planning (Kathy Gillen) Wealth Management Other services including Corporate Recovery, Forensic Accounting and Governance, Risk and Assurance

6 © 2011 Moore Stephens LLP Acquisition process in Europe Duncan Gregory

7 Moore Stephens Corporate Finance Specialist division based in London International remit and active in India Comprehensive range of lead advisory and transaction support services: –Mergers and acquisitions, MBOs/MBIs and disposals –Capital markets related (AIM, LSE and other regulated markets) –Due diligence –Valuations –Business planning, financial modelling and strategic review –Fund raising Privately owned and listed businesses Typical equity value of £1 million to £200 million

8 Indian acquisitions in the UK UK is a leading destination for offshore acquisitions by Indian companies –Cox & Kings £300m acquisition of Holidaybreak –Essar Energy £775m acquisition of Stanflow Refinery –Sahara India Pariwar £500m acquisition of Grosvenor House Hotel –CORE Projects & Technologies £15m acquisition of ITN Mark Education Moore Stephens actively working on acquisitions in certain sectors: –Leisure –Pharmaceuticals and distribution –Motor –Infrastructure –IT

9 Success and failure in acquisitions Largest survey of value creation by Moeller, Schlingemann and Shultz –12,000 transactions –Net losses to acquiring firms: $25.2 billion Key causes of failure –Overpaying –Poor strategy –Financial instability –Inadequate due diligence –Failure to integrate cultures –Failure to integrate operations

10 Why make acquisitions? Effective acquisition strategy driven by overall growth strategy Acquisitions used to meet objectives that: –Cannot be achieved through organic growth and development –Can be achieved more quickly and cost effectively with less risk by buying established performer instead of developing from scratch Strategies fall into 4 broad categories –Consolidation –New markets –New technologies –Industry convergence

11 Key stages of the acquisition process Strategic –Corporate strategy –Acquisition strategy Acquisition process –Acquisition criteria –Target search –Appraisal –Value/negotiations –Finance –Due diligence –Legals/completion Post acquisition integration

12 Developing an acquisition strategy Integration with overall corporate strategy? –Shareholder value creation? Are acquisitions the most effective way of achieving objectives? Feasible strategy? –Are suitable targets likely to exist? –Can they be identified? –Likely to be for sale? Be careful about: –Pursuing growth for growths sake –Deflecting attention from weaknesses in the core business

13 Acquisition criteria? Sector/industry Competitive position within the industry/product mix Revenue/size Valuation Location of operations Likely synergies and integration success A clear acquisition criteria will form the basis of an acquisition search

14 Target search Understanding the target sector is critical Access to information –Overall sector information (press, trade conferences, databases) –M&A activity reviews (specialist data available) –Information about targets (websites, broker reports, filed information) Report on shortlisted targets –Target name, location and business description –Summary financial information –Ownership structure –Consider why a match with acquisition criteria –Prioritise targets

15 Planning the approach Why is the current owner a possible vendor? Non-financial reasons for sale? Synergistic benefits? Integration plan? Critical members of the target management team? Reaction to new management? What critical issues need addressing during early discussions? Maximum likely valuation and to what extent will synergies be shared? Cash, deferred consideration, own shares or a mixture? Does finance need to be raised?

16 Making the approach Initial approach –Write directly to the majority, dominant or controlling shareholder –Confidentiality letters –Vendor quickly asks for indication on valuation range –First proposal will be rejected –However, a process to ensure maximum price achieved may commence While price will be the biggest factor (usually), consider –Certainty of completion –Speed of completion –Minimisation of hurdles, barriers and deal breakers

17 Understand the sale process Vendors key weapon is information flow –Can be managed for tactical purposes Vendor may: –Disclose positive information to encourage bidders to commit high prices –Limit site visits –Disclose more information to preferred bidders –Present information in a positive light –Resist requests for detailed analysis –Limit access to second line management –Limit or delay disclosure of prejudicial information

18 Understand the sale process Acquirer should: –Access as much information as possible –Understand vendors key issues –Know the vendors decision making process –Assess the attitude of targets management team –Consider different approach for owner-managed target UK law requires directors to take into account factors other than price –act in good faith Project management –Achieve an agreement in principle and draft HOA (with exclusivity period) –After completion of due diligence, negotiate sale and purchase agreement

19 Getting to heads of agreement Consider valuation, including to purchaser Information gathering –Information Memorandum, due diligence, data room –Consider how business will fit post-completion Seeing through the figures –Vendors will try to make the business as attractive as possible Identifying key issues, including dealbreakers Modelling is a key tool Preparing the offer Draft heads of agreement, including exclusivity lock-out

20 Types of due diligence Financial due diligence –Data room Vendor due diligence Commercial due diligence Management due diligence Legal and regulatory due diligence IT due diligence Technology due diligence Environmental due diligence

21 Getting to completion Steps to completion –Detailed due diligence –Post completion operating and integration plan –Negotiation of final contracts (including SPA) –Tax planning and off-shore structuring –Finalisation of arrangements for external financing Advisors can help to ensure that: –Specialist advisors are properly briefed –Reporting deadlines are met –Reports are integrated into the decision making and planning process –Issues, conflicts and disagreements constructively addressed

22 Integration Post acquisition implementation plan is crucial BEFORE completion Areas to address include: –Structure –How to capture merger benefits –Payroll –Administration –Sales tactics and product integration –Accounting systems –Many others! Set milestones and allocate responsibilities

23 Common issues for Indian acquirers Acquisition process –Sourcing appropriate targets in Europe –European approach different to Indian –Time zone impact Post acquisition –When value is not created, poor integration is to blame in 70% cases –Talent retention and understanding the people issues –Communication –Synergies not delivered

24 Summary Acquisition process in Europe is well established Complex and emotive issues can arise Deadlines and certainty are important Development of relationships critical Commitment to the process and planning is essential Due diligence and good negotiation can improve transaction terms Local advisors with international experience important to help ensure success

25 © 2011 Moore Stephens LLP Structuring Kathy Gillen

26 Types of Indian Clients using Jersey Corporate –Investment o Capital Markets/Corporate Structuring using Jersey (Public) Holding Companies and Cell Companies o Private equity, real estate, hedge and infrastructure investment opportunities using a range of Jersey Funds Owners of businesses (families): –General asset protection, estate succession and tax planning Structures are simple or complex depending on clients requirements

27 Why Jersey is attractive to Indian clients Wide range of solutions Political and Financial Stability Effective, comprehensive, world class, internationally recognised Regulatory Standards Robust, modern and sophisticated legislation Privacy/confidentiality, not secrecy Tax Neutrality – as investors are outside Jersey there are no domestic taxes Self-governing UK Crown dependency In Europe but not in UK or EU Proven track record in European listings

28 Why Jersey is attractive to Indian clients (contd) Depth and breadth of more than 13,000 finance professionals One of the first jurisdictions to regulate Trust Company Business Clarity and quality of products and services offering Convenient location – 35 minutes by air from London Time Zone (same as the UK)- able to transact business with Jersey practitioners in the same working day Excellent Communications A UK visa is sufficient to travel to Jersey It is common for companies in jurisdictions with double taxation arrangements with India, e.g. Mauritius, to form part of a Jersey structure

29 Some examples of the accolades that Jersey has received in recent times Financial Action Task Force: close to complete adherence, Jersey is considered a co-operative jurisdiction Financial Stability Forum - Jersey is considered to be a group one jurisdiction International Monetary Fund – ranked number 1 in 2009 – Jersey has a robust supervisory framework The G20 considers that Jersey has a tax regime that meets the highest standards of transparency and regulation. The Island is ranked in the top tier alongside the UK, US, Germany and France Jersey was named as the top offshore finance centre in the world in recent official rankings by the City of London.

30 Jersey Tax Regime Standard 0% corporate tax on worldwide income and bank deposit interest paid in Jersey No stamp duty on share transfers No withholding tax on dividends paid or received No capital gains tax No inheritance or wealth tax UK VAT is not levied in the Island

31 Example of a (complex) Corporate Structure *Source Mourants

32 Why Jersey Holding Companies? Reputation Quality of service providers Tax Environment A Jersey (Public) Holding Company is comparable to a UK Company (PLC ) Speed of incorporation If Listed - –Three CREST enabled share registrars. –Ability to trade shares directly through CREST (the UK share settlement system)

33 Facts! 91 Jersey holding companies listed on worldwide stock exchanges from London to New York Combined market capitalisation of over £157 billion Jersey is now one of the leading international finance centre jurisdictions to be used for incorporating listing vehicles

34 Most Common Structures used by Owners of Businesses Trusts Foundations (Underlying company/ies e.g. owning UK real estate)

35 Trusts v Foundations: Features TrustFoundation GeneralNot a separate legal entity - an arrangement A corporate body, registered with Jersey Registrar Assets held in Trustees nameAssets held in Foundations name Contract/ sue/ be sued in Trustees name Contract/ sue/ be sued in own name Must hold property to be validDoes not have to have property including initial endowment Fiduciary responsibilitiesNo fiduciary responsibilities Requirement to provide beneficiaries with information No requirement to provide beneficiaries with any information

36 Trusts v Foundations TrustFoundation Key partiesSettlorFounder Protector/ enforcer (if any) Guardian TrusteesCouncil BeneficiariesBeneficiaries (if any) Key documentsCharter (lodged with JFSC – public document) Trust Deed (not public) Regulations (not public) Letter of Wishes (not public)

37 Trusts v Foundations: Benefits and Uses SIMILAR FOR BOTH! Key additional benefits of Foundations: –Holding real estate directly –Where there is a single family wasting asset

38 Other Vehicles Limited Partnerships - for families Private Trust Companies Family Offices

39 Conclusions Jersey structures can provide a number of solutions for Indian corporate and private clients Jersey is a well respected and renowned jurisdiction which is attractive to Indian clients Moore Stephens….. in India, London, Jersey and….. Internationally …….. has a wealth of experience in assisting Indian clients with Mergers and Acquisitions…… and the necessary structuring

40 Duncan Gregory Partner Moore Stephens Corporate Finance London T + 44 (0) F + 44 (0) M + 44 (0) E Duncan specialises in flotations, financial due diligence and valuations covering a wide variety of sectors on transactions involving UK and overseas companies He qualified with a Group A firm where he commenced his corporate finance career before joining MSCF. He was awarded the ICAEWs Advanced Diploma in Corporate Finance in 2006 He has worked with a broad range of corporate clients and is also experienced in dealing with flotations, transaction support, valuations and raising finance Kathy is a Partner of the Moore Stephens Offshore Group (Jersey, Guernsey, Isle of Man and Gibraltar) and Director of our in-house corporate trust and fund companies She advises international clients, both individuals and corporate bodies, on the establishment and implementation of trusts, foundations and company structures She is a member of the Institute of Directors and in 2004 was awarded the Institute of Directors Chartered Director Status, the first person to have achieved this distinction in the finance sector in Jersey She is responsible for Indian clients Kathy Gillen Partner Moore Stephens Offshore Group Jersey T +44 (0) F +44 (0) M +44 (0) E Profiles

Download ppt "PRECISE. PROVEN. PERFORMANCE. © 2011 Moore Stephens LLP Acquisition process in Europe Duncan Gregory Structuring Kathy Gillen 23 September 2011"

Similar presentations

Ads by Google