Mergers & Acquisitions

In Central America, mergers and acquisitions are terms that have become popular in recent years, also referred to as M&A. The term refers to the practice of business groups to consolidating with the strategic objective of achieving inorganic growth. A merger involves the formation of a body of common interest by integrating the two groups into one common entity. An acquisition consists of a group buying a controlling stake - up to a 100% - of the assets or equity of another company.

 

Due to the similar nature of this process, minority investments and capital raises are often referred to as Merger and Acquisition operations as well.

 

A key step in evaluating different transactions is to understand and differentiate between a strategic buyer and a financial buyer.

 

Strategic Buyer vs. Financial Buyer

 

A financial investors’ key objective is to invest money in order to produce a high yield under a given risk tolerance. The financial investor/buyer usually goes into an investment with the end objective of selling the position within a predefined timeframe at a gain. Within the category of financial buyers come individuals, families, and business groups engaged primarily in this activity - e.g. private equity funds, venture capital investors and other such investment funds.

 

A strategic buyer has the fundamental objective of creating shareholder value by acquiring or merging with another company. They invest in operations that offer strategic value to their own enterprises. Strategic value can be realized in several ways, for example, gaining a geographical advantage, penetrating a new market, strengthening the position in an existing market, diversifying the product portfolio, etc.  There are also opportunistic buyers who buy a weak competitor or the division of a company seeking to refocus on its core business.

 

On the seller’s side, stepping into these processes may be predicated on various motivations. For example, while some entrepreneurs may want to sell part - or all - of their shares to generate liquidity and diversify personal asset portfolios, others may be looking to grow their business or may have identified a need to attract a stronger partner that present a strategic fit.

 

 

“Typical” Processes 

 

No two companies in the world are alike. Similarly, each M&A process follows its own course. Nonetheless, each purchase or sale transaction follows a general framework, with similar key steps and milestones.

 

Each transaction process could be summarized - roughly - with the following diagram:

  

In both buy-side and sell-side mandates, the scope of our transactional services is tailored to the needs of the project and may include one or more of the following services:

Financial Advisory

  • Financial Valuation and Fairness Opinion
  • Financial Feasibility Assessment
  • Strategic Assessment of Asset Portfolio
  • Evaluation of Investment / Divestiture Opportunities 

Sell-Side Advisory:

  • Evaluation of Bids and Proposals
  • Preparation of Presentation Materials
  • Identification and contact of candidates, strategic or financial
  • Negotiation of Partnership, Sale or Acquisition Structures
  • Management of the Due Diligence Process 

Buy-Side Advisory:

  • Identification and contact Candidates
  • Financial Analysis and Company Evaluation
  • Definition of letter of intent - Proposed Value and Structure
  • Negotiation of key deal terms
  • Management of the Due Diligence Process 
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