Staying ahead in the M&A market
THE STRENGTH OF MANUFACTURING IN THE M&A MARKET
THE TOP FIVE REASONS FOR SELLING A BUSINESS
THE IMPORTANCE OF ESG IN M&A
IN THIS ISSUE
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Alison Horton, our Senior Research Analyst gives you her expert opinion on the current state of the Financial Services sector Expert opinion: Financial services industry
Deciding to sell a business is a task that requires much thought and careful consideration. We investigate the top five reasons why people look to sell 6 The top five reasons for selling
A strong manufacturing sector often plays a key role within a thriving M&A market 12 The strength of manufacturing in the M&A market
How is the global economy affecting M&A in the UK? 8 The resilience of the UK M&A market is shining through in spite of global economic uncertainty
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ON THE COVER Mergers & Acquisitions can be a difficult market to navigate. In our cover special, Inform explore the ways in how you can stay one step ahead Staying ahead in the M&A market
Trade? Private Equity? Alternative investment? Considering every available option can be the key to securing your ideal exit structure Which exit route is right for your plans?
The Importance of environmental,
social and corporate governance in M&A
Why is ESG rapidly rising towards the top of corporate agendas, and what does that mean for M&A? 26
What factors affect your business' value, and how can an experienced adviser elevate it to the next level? Maximising Your Value
STAYING AHEAD IN THE M&A MARKET
he M&A market of today includes significant participation from corporate buyers, PE portfolio add-ons, financial investors, special purpose acquisition companies
success factor for deals. Most managers perceive talent retention as one of the biggest influences on the success of a deal, and with a record number of employees actively job-searching, the challenge proves to be more
crucial as industries face a talent shortage. In recent times, companies take extra care in both diligence and the integration stage to retain their talent. They invest in understanding targets' points of influence while also focussing on employee engagement. Those who successfully retain key talent through integration discuss that identifying a strong and compelling vision for the future is the most significant element contributing to success; which also allows employees to work towards that vision.
and venture capital; the latter three of which have grown twice as fast in recent years. Staying ahead in complex market is key to making your business a more attractive acquisition or investment opportunity. At KBS Corporate, we are seeing enterprise values increase, making now an opportune time for shareholders to evaluate their own value and stay ahead of the rapidly changing market by focusing on some key actions.
Enterprise values are increasing, making now an opportune time for shareholders elevate their own value and stay ahead of the rapidly changing market
Revenue synergies To justify record-high deals, it's important to identify, quantify and capture revenue synergies. More recently,
Talent Elevating the importance of talent can be a critical
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revenue synergies are proving to be significant for the modern high-valuation environment. Profitable acquirers develop propriety, data-driven perspective on revenue synergy value creation during due diligence, offering them more confidence in valuation. Additionally, the more experienced acquirers also take advantage of the final phases to prepare a product roadmap and adapt the sales model to realise results from day one. Subsequently, they monitor the outcome and develop their revenue synergies with each transaction. ESG Applying environmental, social and corporate governance to deal making is quickly becoming a crucial part of due diligence.
influence market price; and potentially reduce external risks. A business that can demonstrate steady growth is more likely to attract potential acquirers and investors. Technological advancements Technology is a known driver of several industries and a business’s ability to stay ahead of technological advancements can also make them a more attractive investment proposition. By staying in tune with the dynamic changes known to technology, a business will be able to adapt to the evolving world around them, whether that is to create cost efficiencies, improve communication, or implement remote working capabilities. Technology presents an improved
platform for a business to reach a wider market, attract and retain talent, and improve value drivers within the business. New products and service lines One of the most important practises of maintaining an edge in the market and against your competitors is to innovate and broaden your product or service range. Investment into existing products and services, and diversification
M&A managers comprehensively
A business that can demonstrate steady growth is more likely to attract potential acquirers and investors
analyse ESG in deal making often and the majority expect their company’s focus on this matter to increase. Some companies maintain their competitive edge on this matter. By integrating ESG into their M&A process, they are presented with an advantage in pursuing value creation opportunities as well as
into new markers, can facilitate growth in a company's customer
a lead in meeting their ESG priorities. Additionally, by incorporating sustainability as a part of each deal and utilising corporate priorities as a benchmark to assess each deal, the best companies will discover features that will advance existing ESG initiatives and create economic value. Growth and expansion Focussing on the growth and expansion of a business not only advances the company, but it also profiles itself as an attractive acquisition target. This particular focus allows a firm to increase resources and stock; generate mores sales and profits; reach new customers or markets; reinvest revenues into the business;
base, increase the spending of existing customers and extend the attractiveness of the rest of the products and services through heightened brand equity and awareness. In turn, this can increase a company's value, whilst making it a viable acquisition target to companies in synergistic markets, as well as those within the space in which it already operates. In a constantly evolving market, applying practices such as these can ensure a business is an attractive proposition to a wider range of buyers and investors, can increase its value, and create leverage for any outgoing shareholders to have a greater voice in the specific terms and structure of the transaction.
THE TOP FIVE REASONS FOR SELLING A BUSINESS
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here are a wide range of reasons why a shareholder might sell their business. They can be motivated by a change in personal circumstances, a change in interest or it could be beneficial
OWNERS HAVE TAKEN THE BUSINESS AS FAR AS THEY CAN
Sometimes the reasons for a sale can be as simple as the owners have taken the business as far as they can. Each business is unique and personal, so it can be difficult to realise that the business has reached a ceiling. This type of sale can require further investment from a private equity buyer to overcome any financial restraints. Alternatively, this type of opportunity may attract a trade buyer with more resources or experience as a bolt-on acquisition to their existing offering.
to bring in a new owner. During our 25 years of experience, we have dealt with all reasons for sale. This is why we are confident that as experienced advisers we can work with sellers’ individual circumstances to produce a positive outcome to help them achieve a sale, regardless of their motivation.
The first and probably one of the most common reasons is retirement. Many owners dedicate years of their lives to their businesses and wish to ensure their continuation once they decide to retire. This can result in a management buyout if an employee is looking to run the business but, when the time comes and there isn’t a clear successor then the company will come to market. By opting to sell the business rather than closing, the owners can realise the value they have established over the years. The funds generated by a sale enable business owners to fund their retirement plans whether that is just to maintain their quality of life or to allow them to pursue new interests and passions.
TO ACHIEVE GROWTH
A similar cause for a sale is to achieve further growth. This can be achieved by pursuing a larger trade buyer who has more knowledge of the market or resources available. Businesses can often benefit under the impetus of a new owner, who can provide a new range of skills.
CAPITALISE ON VALUE
Whatever the reason for the sale, it is vital to work with an experienced adviser to achieve the highest value possible. KBS Corporate has more than two decades of experience in advising our clients on all manner of exits, so we understand each business owners’ objectives, as well as how to source the most appropriate acquirers to meet them. in personal circumstances such as the need for capital. On the other hand, some business owners may take a purely entrepreneurial approach, who establish businesses merely to generate profit before moving on to their next venture. Finally, a sale may be motivated by the owners’ desire to capitalise on the value they have built. This type of sale could be implemented due to changes
OWNERS PURSUE DIFFERENT VENTURES
Another common reason for selling is to enable the business owner to pursue different ventures. This is often the case when the owner has a varied business portfolio and wishes to streamline their time and resource. Often, a shareholder may opt to pursue a more profitable venture which requires much more time and focus, and may look to sell the current business to an acquirer who can give it the resource it deserves.
HOW IS THE GLOBAL ECONOMY AFFECTING M&A IN THE UK?
he M&A market is generally more robust than other segments of the economy; when the impact of the COVID-19 pandemic first hit, the M&A market was predicted to experience
experienced high levels of interest and completions within throughout the past year. Manufacturing alone accounted for nearly 25% of all deals KBS Corporate has successfully advised on last year, many of which are seeing higher than average deal values being generated for our clients. Within the Professional Services and Engineering sectors, we have generated over 2,000 expressions of interest for our clients within these industries and, along with many others, are experiencing high levels of demand which in turn is generating competitive bidding environments and, ultimately, higher deal values. The importance of working with experienced advisers when considering the sale of your company is paramount, and even more so in the context of the current economic climate. For almost 25 years, KBS Corporate has been guiding UK business owners through their company sale journeys, and in that time we have established ourselves as one of the most trusted and prolific advisers. Whilst there is no denying that the state of economic affairs will undoubtedly play a role in the short-term future of the M&A marketplace, do not rule out the already proven resilience of the market and that, with the correct support and advice in place, higher than ever levels of interest and deal values are being achieved.
an unprecedented downturn. This simply did not happen; the data showed that the market stabilised quickly and by 2021, had generously surpassed pre-pandemic levels in terms of deal volumes. Adding to this; over 96,000 global transactions closed within 2022 alone, despite global economic uncertainty brought on by inflation, conflict, unpredictable stock markets, and government instability. Due to the robust nature of the market, it is widely agreed upon that mergers and acquisitions will play an increasingly vital role in corporate growth strategies for the foreseeable future, as companies and investors look to accelerate growth and stay ahead of the curve amidst this precarious global climate. This strength is demonstrated across multiple sectors with Refinitiv’s November 2022 EMEA Mid-Market M&A Insight reporting that the Manufacturing, Healthcare, Financial and Professional Services, Technology, and Industrial sectors performed particularly well in 2022. These are also sectors that we, at KBS Corporate, have
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FINANCIAL SERVICES INDUSTRY
BY ALISON HORTON , SENIOR RESEARCH ANALYST, KBS CORPORATE
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t’s a bit of a beast, the financial services sector, as it spans banks, investment houses, lenders, finance companies, real estate brokers and insurance companies. The sector as a
a potential candidate’s decision-making. There are 2.3 million workers in the sector in the UK and 20.5% of that 2.3 million were born outside of the UK. The demand is there from firms to recruit the best of the best, no matter where the talent resides globally. As a result of that demand, in August this year, the ‘High Potential Individual’ (HPI) visa was introduced for recent graduates from non-UK universities ranked in the Global top 50 to provide a fast route to work in the UK for 2 years. To be clear, the visa isn’t exclusive to the FS industry – it can be utilised by other industries looking for the best global talent. Training and apprenticeships are a topic of conversation that is on a lot of companies struggling with the staffing shortage and the FS industry is no exception. Unfortunately, the priority of upskilling and training is
whole contributed £173.6bn to the UK economy in 2021, which made up 8.3% of total economic output. Amazingly, the UK boasts the most globally connected banking hub and is also the world's largest centre for international debt issuance, commercial insurance and reinsurance, foreign exchange (FX) trading and asset management. Being this ahead of the game poses some pretty unique challenges for operators in the sector and there is pressure building on the responsibility to improve the sector on the whole and the wider ecosystem.
not perceived as a priority on a whole for the industry. The Apprenticeship Levy was introduced two years ago to create long-term sustainable funding for apprenticeships and to give employers more control to provide their staff with a range of training opportunities. Thousands of employers including top financial firms like Lloyds Banking Group as well as public sector organisations like the NHS and the British Armed Forces are using their levy funds effectively to set up a range of high-quality apprenticeship programmes.
COP26 reaffirmed the UK's desire to be the world's number one for sustainable finance. The UK leads in both conventional and green finance centre rankings because of its continued commitments to supporting the government's requirements to deliver net zero plans across the UK economy. The Financial Conduct Authority (FCA) is one of the regulators for
With over 2.3 million jobs in the [financial services] sector, attracting and retaining high quality talent is tricky.
approximately 50,000 financial services firms and financial markets in the UK. Although it works independently of the UK government, the FCA recognises the
Recent M&A UK financial services M&A deal volume hit a seven-year high, in H1 2022 with 136 deals in the first half of the year and a total disclosed deal value of £8.6bn. • The number of UK insurance deals rose from 32 in H1 2021 to 48 in H1 2022. • In the UK banking sector, there were 34 deals in H1 2022, up from 25 in H1 2021 • Within the UK wealth and asset management industry, the number of deals fell marginally from 61 in H1 2021 to 54 in H1 2022. KBS Corporate very recently advised Ravenhall Risk Solutions on their sale to The Jensten Group, the sale of Admiral Wealth Management to the international wealth and investment management group, Kingswood, and the sale of employee benefits firm Vivup, to Omni Partners.
weighty responsibility its members have surrounding climate change, and other environmental, social and governance (ESG) and how increasingly central to the activities of listed companies, regulated firms and consumers these factors are. To ensure the transition is successful, a continued shared common sense of purpose across government, trade associations, regulators, and firms themselves is needed. Attracting and retaining talent is an ongoing issue across lots of industries and the Financial Services sector isn’t immune to this. With over 2.3 million jobs in the sector (1.1 million in financial services and 1.2 million in related professional services), attracting and retaining high-quality talent is tricky. Wage demands, an appealing work/life balance, hybrid/flexible work patterns, company perks and incentives all factor into
THE STRENGTH OF MANUFACTURING IN THE M&A MARKET
anufacturing has long played a key role within the UK economy, and it was one of the first to recover post-pandemic. It is therefore no surprise that a
research and development tax credits which generate further investment and contribution to both their own output and provides a boost to the UK economy. The latest annual government statistics, published in September 2022, stated that over one fifth of all R&D Tax credits were claimed
strong manufacturing sector plays a key role within a thriving M&A market. This resilience of the industry is demonstrated in the Manufacturing: Key Economic Indicators report carried out by the UK Government. The report found that by 2021, the sector contributed 9.7% of total UK economic output. In addition to such a significant contribution to the nations gross domestic output, the manufacturing sector also provides high levels of employment with 7.3% of those employed in the UK, working within the sector.
by companies operating within the manufacturing sphere, surpassed only by the information and communication sector. This figure presents an interesting offering an additional layer of value when considering companies within this industry as a potential target. Another key element of the appeal of manufacturing is the sector continually drives high levels of M&A interest. Refinitiv’s July 2022 Mid Market Review reporting that the manufacturing and opportunity to potential acquirers and investors,
...the manufacturing sector contributed almost 10% of total UK economic output...
Manufacturing does not only play a notable contribution to Gross Domestic Product (GDP), but it also offers a plethora of opportunities for innovation. The sector is truly diverse, and can encapsulate any company operating within the production industries. This in turn permits manufacturing companies to apply for
industrial sectors are commanding particularly high levels of investment and acquisition interest. This sentiment can be echoed in our own experiences at KBS Corporate, with the manufacturing sector alone accounting for nearly a quarter of all deals completed in 2022 alone.
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The acquisition of Allied Insulators
A notable transaction advised upon by KBS Corporate in 2022 involves the acquisition of Allied Insulators by publicly-listed Swedish corporate, Addtech AB, based in Stockholm. KBS Corporate's client, Allied Insulators, is a market-leading manufacturer of insulators, which are supplied to clients throughout the UK and exported internationally to the Middle East and New Zealand. Addtech approached the opportunity with the aim to expand their reach beyond the Nordics. Hans Andersén, Business Area Manager of Addtech Energy commented: "The acquisition of Allied Insulators further strengthens our position as a leading player in the field of electric transmission lines. Allied Insulators excellently complements our operations and establishes us as a significant supplier of the overhead line material to network owners outside the Nordic region." In addition, Foresight Group LLP's acquisition of Rooms & Views Manufacturing, a manufacturer of PVC-U windows, doors, and conservatories marks the investment group’s second acquisition via KBS Corporate and will enable Foresight Group LLP to further diversify its manufacturing portfolio into the windows and doors manufacturing sector. There is no denying that manufacturing is a stalwart of the UK economy, this sector plays a vital role in UK business. As a result, companies within the sector often see not only high levels of acquisition interest but also attract high deal values - this will see the manufacturing sector remain as one of the key players within the M&A market.
further strengthens our position as a leading player in the field of electric transmission lines. Allied Insulators excellently complements
our operations and establishes us as a
significant supplier of the overhead line material to network owners outside the Nordic region.
HANS ANDERSÉN BUSINESS AREA MANAGER ADDTECH ENERGY
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Q&A WITH RICHARD STOCKS
How long have you been at KBS Corporate? I joined KBS as a Research Analyst in October 2017, so I've just celebrated my 5-year anniversary!
What is your role at KBS? I am now a Senior Research Analyst working with both the Corporate and Corporate Finance teams. I identify who the most appropriate and likely buyers and investors are for our clients’ businesses and then make approaches and engage in early discussions with them. What did you do before joining KBS Corporate? Prior to joining KBS, I worked with data analytics and consumer credit reporting company, Experian. I also held other similar research-based roles throughout the earlier stages of my career What do you like most about working for KBS? I enjoy the sheer diversity of the types of business I get to work with, expanding my knowledge on certain industries and getting to learn about new ones – some of which you don’t realise even exist! In your opinion, what is the single most satisfying thing about your role? When a project you work on successfully completes is always satisfying. We build a personal relationship with our clients so to see them realise their objectives and knowing that you helped to make that a reality for them is a big win.
What do you like to do outside of your working life? I enjoy sport – football (more watching than playing these days), cycling, skiing and hiking as well as travel and reading.
DIGITAL MARKETING COMPANY FOUNDED BY THE APPRENTICE WINNER ACQUIRED BY XDNA GROUP, ADVISED BY KBS CORPORATE
ounded in 2015 by Mark Wright following his victory in the 2014 series of BBC's 'The Apprentice', Climb Online, has focused on its niche and established itself as a trusted and reliable provider
group, commented: “I couldn’t have sold my business without KBS. When Lord Sugar and I first started being approached from trade buyers, and financial buyers and decided to sell our business we knew in order to have the most structured process and achieve the highest price we needed to work with KBS. “We were initially impressed with the marketing materials they put together, the teaser document and IM were professionally written and beautifully designed and they took the time to understand our business to present it in the best possible light. “All that said, by far the best part of working with KBS was the team they assigned us. Ian Barton & Anne Pritchard are truly a different class of professionals. Their knowledge of buying and selling a business is unmatched and they dominated the process at every stage, the buyer profiling, pre-screening, meeting prep and follow-up made my job easy, all I ever needed to do was talk about my business. It was no surprise we got lots of interest and a great price. They were always at the end of the phone, sometimes at crazy hours to educate me on a point or calm my nerves towards the end. I genuinely think of the KBS team as friends and the next time I’m buying or selling a business, Ian & Anne will be our first call. Thanks for everything!” Lord Sugar commented on the major milestone: "Climb Online has experienced rapid growth since Mark and I founded the business, and I'm so proud of what has been achieved. I look forward to seeing the next phase of growth with great interest, as this is a great example to all
of quality digital marketing services to clients across several sectors. The shareholding of the Company is held 50:50 between Wrighton Investments Ltd and Amsvest Limited. Wrighton Investments is the investment vehicle of Mark Wright and Amsvest is the investment vehicle of Lord Alan Sugar. The company was formed as a collaboration following the airing of the 2014 BBC series, ‘The Apprentice’ which Mark Wright won. Over the years Climb Online has developed an enviable blue-chip client base including TikTok, CV Library and Groupon. The opportunity attracted high levels of interest predominately from UK trade buyers, with the successful offer coming from xDNA Group, an award-winning digital agency with offices in Asia and the UK. xDNA Group is currently following an aggressive growth strategy having previously acquired Big Reach Marketing and Fluid Studios and opening an office in Dubai. Having built the business over several years Mark Wright approached KBS Corporate Finance with the sale of their business.
Mark Wright, who will continue as a Shareholder of the
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Mark Wright, Founder and Michael Bush, Managing Director Image: Climb Online
budding entrepreneurs of what can be possible."
Mark Chambers, xDNA Group Executive Chairman, commented: “The combination of xDNA and Climb Online is extremely compelling - creating one of the largest full service digital and software agencies in the UK. We have some exciting expansion plans to continue to develop the group that will add true value to our clients across the globe. It is an exciting time for the team, and I'm looking forward to delivering further growth and success." Ian Barton, Managing Director, and Anne Pritchard, Corporate Finance Executive, at KBS Corporate Finance advised Climb Online throughout the process. Ian commented: “We are delighted to have advised Mark and Lord Sugar on the sale of Climb Online, the first successful exit of a business founded by the winner of BBC’s ‘The Apprentice’. Having watched Mark start his journey so publicly on the show and to have been trusted to advise the shareholders on the completion of their entrepreneurial journey together was a huge privilege. The business attracted huge interest from a number of international parties and we were pleased to have completed the deal in a smooth and targeted process with XDNA Interactive. We wish Mark well in his next entrepreneurial venture and the whole Climb Online team in the newly enlarged global group, and we will be watching the next series to see who Lord Sugar hires as the next winner.”
I couldn’t have sold my business without KBS. When Lord Sugar and I first started being approached from trade buyers, and financial buyers and decided to sell our business we knew in order to have the most structured process and achieve the highest price we needed to work with KBS.
MARK WRIGHT FOUNDER, CLIMB ONLINE BBC's THE APPRENTICE WINNER, 2014
MAXIMISING YOUR VALUE
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here are many ways to provide potential value for your company. Advisers and accountants can have differing views on how to value a business based on varying criteria.
KBS CORPORATE'S PROVEN STRATEGY
+ We gain a deep understanding of your business to allow us to appreciate and be passionate about your value drivers + We create market-leading documentation and presentation for your company + We build complex financial models and forecasts to articulate the future value of your business + We offer unparalleled buyer reach, leaving no stone unturned in our search for your perfect buyer + We harness technology to maximise buyer appetite and create optimum competitive tension + We have an experienced team with the knowhow and technical skills to drive the transaction
These will often include multiples of turnover, earnings, adjusted profits, assets and balance sheet value. Any initial discussions surrounding the potential value of your company are only a guide to provide a range of where the end transaction value may fall. In reality, the sale value can only be determined by how much a buyer is prepared to pay for it. As advisers, KBS Corporate's role is to ensure that the key attributes of your business are clearly demonstrated to potential acquirers and investors, and that all upside opportunities to them as an interested party are clear from the outset, which in turn helps to maximise overall transaction value. Some of the key internal, external and KBS Corporate ‘value drivers’ that affect the end transaction value paid for your business are highlighted below.
OUR GUIDE ON VALUE The EBITDA (Earnings Before Interest Tax Depreciation & Amortisation) of a company indicates the current operational profitability of the business. A multiple of maintainable EBITDA is a widely used calculation to provide a potential transaction value of the company. It is important to also consider future financial performance projections of your company in conjunction with this to highlight your positive growth trends to accentuate the desire and motivation of any potential acquirers. The price that an acquirer is prepared to pay for your company will be based on several factors, including the ‘type’ of buyer and the ‘motivations’ of that buyer.
COMPANY ATTRIBUTES & OPPORTUNITIES
+ Revenue and profit profile + Sustainability of earnings + Strength and longevity of customer base + Quality of Management and Staff + Systems, software or technological advancements + Balance sheet and surplus asset value + New contract wins, WIP and pipeline + Growth Opportunities and new markets + Brand, IP, patents and trademarks
+ Macroeconomic backdrop + Geopolitical environment
+ Availability of funding and lending criteria + Liquidity in PLC, PE and investment markets + Tax legislation
+ Foreign exchange rate movements + Legislative changes in the sector + Barriers to entry within your sector
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Q&A WITH JULIE DOYLE
When did you join KBS Corporate and what is your role? I joined the company in March 2017, and I am Head of Research. I oversee the Research, Admin and Support functions within the KBS Corporate Operations Department. We source and contact the most appropriate buyers and investors for our clients’ businesses. What is your experience prior to working for KBS? My first senior role was at global BPO Serco, working on their Child Support Agency Contract. After a few years in clerical casework and analyst roles I spent five years working in Coaching and Performance Management Roles, obtaining ILM qualifications during this period and leading a number of projects with the Change & Innovation Unit to implement contract wide Q&A initiatives. What do you like most about working for KBS? The people. We have a true team spirit within the team and embrace our core values of Trust, Professionalism, Collaboration and Innovation . This means no one is afraid to ask questions or to make mistakes and will instead learn and grow from them whilst always striving for better. Our final core value of Enjoyment then comes naturally to us! The most rewarding part of my role is when a member of my team is informed that a transaction that they sourced the acquirer for has completed. On the corporate research team, we get the pleasure of forming working relationships with not only our clients, but also the acquirers and investors that we reach out to. So when a transaction a member of our team has worked on comes to fruition, it is satisfying not only from a personal level for each analyst, but also professionally, knowing all parties we have worked with have achieved success. What are your hobbies outside of work? I’m a huge supporter of musical theatre and as an extension of that, I also enjoy singing myself. In your opinion, what is the single most satisfying thing about your role?
"I'VE LEARNED THAT PEOPLE WILL FORGET WHAT YOU SAID, PEOPLE WILL FORGET WHAT YOU DID, BUT PEOPLE WILL NEVER FORGET HOW YOU MADE THEM FEEL." MAYA ANGELOU
WHICH EXIT ROUTE IS RIGHT FOR YOUR PLANS?
PRIVATE EQUITY? TRADE? AN ALTERNATIVE ROUTE?
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here are many options to consider before exploring a sale or exit plan,
business owner the widest possible scenario of choices when realising the value of their shareholding.
and many shareholders often do not consider that a potential sale to anyone other than an acquirer who already operates within their sector as a realistic possibility. Most believe that a trade buyer would see greater value in the business due to a deeper understanding of the sector. In many cases, trade buyers do offer excellent deal structures, but in our experience at KBS Corporate, alternative options can often see greater future value in the business and offer more flexible deal structures. PE firms for example will typically hold several
Trade Acquirers A trade acquisition often provides an outright sale, either to a private or publicly owned company, typically involving a buyer within an equivalent or complementary sector. The acquirer could be UK based or be an overseas company looking to gain a foothold in the UK market.
Private Equity A Private Equity firm is an investment management
company that looks to invest these funds in return for an equity stake in companies with growth potential. The capital raised can be used to drive growth in the business through investment into new technologies, enhanced cash flow, the introduction of additional technical expertise and a more engaged and motivated employee base through shared incentives. Management Buy-In/ Out A Management Buyout (MBO) is a purchase made by the company’s
investments within a given sector, giving them further knowledge and experience. What company owners must ask themselves is: “What is important to me?”. Inevitably, all company owners want maximum choice when considering their exit strategy. It is better to sell
...it is important to explore all possible outcomes when you consider the strategy for capitalising on the value of your business...
knowing that the decision to accept an offer was made once every option has been exhausted, without only exploring a small part of the potential market of buyers. It is important to explore all possible outcomes when you consider the strategy for capitalising on the value of your business. This will put you in the strongest position when deciding which route best delivers your objectives. Exploring other alternatives Experts in the industry for 25 years, KBS Corporate are aware that PE firms are not for everyone. KBS have the knowledge and experience to facilitate a range of transaction types to suit your situation and exceed your objectives.
management team. A Management Buy-In (MBI) is when, on a change of ownership, external management is introduced to supplement or replace the existing management team. Employee Ownership Trust An EOT is a form of employee benefit trust introduced by the UK government to facilitate wider employee ownership. No capital gains, income, or inheritance tax liabilities will incur through a properly structured EOT, and Directors can remain in situ post-disposal. The sale can often be much quicker and result in no large changes to day-to-day operations.
KBS Corporate offer a bespoke service, this involves the strategy of exploring all available options to give a
Q&A WITH SHANNON JACKSON When did you join KBS Corporate? I joined the company in February 2019 as a Marketing Administrator. What position do you work in now? I am now a Senior Marketing Executive and my particular focus is campaign management. This includes planning and organising both awareness and client generation campaigns across various online and offline mediums. What is your experience prior to working for KBS? My educational background was in musical performance, and I had previously worked for the DWP as well as in the hospitality sector. I had no formal Marketing experience prior to joining KBS, so I am very proud of how far I’ve been able to grow and what I have been able to achieve here in four years here. What do you like most about working for KBS? The opportunity for growth. I began on the Administration Team, and have worked my way up into this role. The management within the marketing department are very keen on helping existing staff grow, and will always aim to look internally when new positions are created to see who could be a fit and add further value. What do you enjoy most about your role and working for the company? Our goal is to make shareholders aware of the opportunities that come with exploring a sale, so seeing the statistics on new client acquisition and completing the press releases on successful transactions that KBS have advised on whilst knowing that myself and our team have helped to make that possible brings a great sense of personal pride. What are your hobbies outside of work? Reading, watching (or yelling at) sport on TV or in person, and going out to try new foods with friends.
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INVESTORS IN PEOPLE ACCREDITED
THE IMPORTANCE OF ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE IN M&A
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n a swiftly moving and conscious society, environmental, social and corporate governance (ESG) is rapidly becoming a primary concern for regulators, investors, clients and
The determination of ESG obligations varies amongst industries, companies and even by the specific deal. Subsequently, companies must decipher between ESG motivated and ESG-conscious M&A. ESG-motivated transactions are pursued clearly to progress the buyer's ESG plan. The most common example would be in the carbon-intensive sectors. M&A is an influential factor in the energy sector’s shift to renewable sources of power; and within consumer products, the transition from animal to plant-based proteins has provoked a surge in M&A and partnerships. On the other hand, ESG-conscious M&A features an ESG angle across the M&A value chain, even if the motivating deal theory is not ESG related. A potential investor may, for example, complete due diligence to test if a target’s carbon footprint is aligned with the acquirer’s sustainability goals, unrelated to the deal rationale. Companies searching for transparent and socially
employees – and is also quickly rising towards the top of corporate agendas. With the urgency surrounding the matters, it is becoming a mark of a business' quality and a measure of their utmost ethics. Many now perceive a well devised corporate ESG strategy as a positive indicator for long-term revenue growth. In a global survey of 281M&A decision makers carried out by Bain & Company and stated in their most recent M&A report, 65% of these executives expect their own company’s aim of ESG to increase within the foreseeable 3-5 years. The majority of these participants also warrant higher deal valuations sourcing from ESG leadership. Alternatively, they anticipate this to be the case moving forward, suggesting the need for buyers to appropriately assess and value their target’s performance within this matter.
conscious supply chains will thoroughly analyse a potential acquisition vendor base. This ESG-conscious mindset is trending across industries, although different sectors will focus on different ESG topics. The starting point of this success begins with linking corporate ESG strategy to M&A by making sustainability part of each deal thesis. It means using corporate priorities as a level to evaluate each potential deal and find assets that will advance existing ESG initiatives as well as create
Various businesses have already adopted urgency by integrating ESG into their M&A processes. Consequently, this gives them an advantage in pursuing value creation opportunities and a lead in fulfilling their ESG priorities. Through the realisation of this as an M&A priority – an influencing factor in delivering deal value – these companies are often ahead of those that are yet to advance their M&A models to account for the increasing importance of ESG.
In a global survey of 281 M&A decision makers, 65% of executives expect their own company’s aim of ESG to increase within the foreseeable 3-5 years.
economic value. For example, leaders in the energy sector often refer to ESG schemes to assist them in meeting the expectations of investors and financiers to lower the cost of capital. Throughout other industries, ESG programmes can also add value by helping to maintain costs such as waste reduction. Environmental, social and corporate governance will continue to evolve and influence deal-making within the M&A sector. As numerous companies compete to flourish in a challenging economic environment and meet the rapidly transitioning consumer trends, they will also feel the additional pressure of demonstrating strong sustainability strategies that will offer more to a potential acquirer than its competition - and which ever way we look at it; that is typically the underlying rationale behind any M&A transaction.
When evaluating a target, acquirers now investigate further into greenhouse gas emissions, business ethics and supply chains. The traditional 'tick-box approach' to sustainability is simply not sufficient any longer. For example, a food producer recognised for its healthy and environmentally conscious produce utilised due diligence to understand a potential acquisition target’s performance on a range of ESG factors. The outcome revealed that the target, an ingredient company, had a positive environmental profile that surpassed competitors and had a strong positioning on consumer health that could competitively benefit the potential acquirer. In comparison to a competing company that solely actions the traditional requirements, the alternate business that has embedded sustainability to its core will ultimately win the attention of an investor or acquirer, with the promise to continuously thrive in ESG terms.
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