Polaris Infrastructure Inc. (TSX:PIF), a Toronto-based company engaged in the operation, acquisition and development of renewable energy projects in Latin America, has closed the acquisition of 100% of the issued and outstanding shares of Union Energy Group Corp. (UEG). UEG is an owner and developer of run-of-river hydro projects located in Peru.

As part of the UEG acquisition, Polaris Infrastructure has acquired the following assets:

• Canchayllo – a single 5 MW project in operation since 2015 ("Canchayllo");
• Generación Andina – two projects in the late stages of construction totalling 28 MW of generating capacity ("Generación Andina projects");
• Karpa – a single 20 MW project with a power purchase agreement ("PPA") in place ("Karpa");
• Portfolio of early stage development projects aggregating to approximately 189 MW.

Becker Glynn advised on certain aspects of the transaction, doing work related to restructuring an existing financing of a UEG subsidiary involved in the Generación Andina projects. The firm acted as New York international transaction counsel to Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (“FMO”) and DEG - Deutsche Investitions-und Entwicklungsgesellschaft mbH (together with FMO, the "Lenders") as Agent in connection with financing that the Lenders had extended in 2015 to Generación Andina S.A.C. - a project company controlled by UEG (the “Financing”).

In connection with the Polaris acquisition, the firm continued to represent FMO and DEG regarding the Financing and assisted with the negotiation and documentation of the restructuring of the Financing. The team consisted of Partner Peter Hosinski and Counsel Andrea Marquez-Bottome, with assistance from Foreign Associate Eduardo Kappel and Associate Matias Sueldo.

Healthcare-focused GP ArchiMed has acquired French biotechnology laboratory Clean Cells from Sodero Gestion.

Over the past three years, Clean Cells has experienced substantial growth in its original core business segments and made a successful launch as CDMO in the phage therapy sector. ArchiMed has joined the capital of Clean Cells to help drive the company’s growth strategy in its core business areas and to strengthen its investment capacity. ArchiMed is buying out family members and other long-standing shareholders, including T.O.D. Finances and Sodero Gestion.ArchiMed is the first independent, Pan-European private equity group focused on healthcare SMEs. The group is continuing to invest in the biopharmaceutical production and development field, following its investments in Deallus Consulting, Polyplus-transfection and Provepharm Life Solutions. ArchiMed and two of the Founders of Clean Cells are joining forces to roll out an ambitious strategy to strengthen the company’s market position in biosafety testing and cell and virus seed banking at an international level, and to develop the phage therapy CDMO activity. A new pharmaceutical production site will be operational in 2020 to address the growing number of projects.

To complete this transaction, Clean Cells was advised by financial advisory firm Advolis and law firm Oratio. For its due diligence, ArchiMed was assisted by Mazars (Financial, Tax, Social), Lamartine (Legal), Larka (Commercial, Quality & Regulatory), Becker (Intellectual Property), and SOGEDEV (CIR).

Adviser Interview - Pierre-Anthony Brioir, Director at Larka

What was Larka’s role in the transaction?

Larka performed the strategic due diligence and advised ArchiMed on all relevant strategic, commercial and technological aspects of the transaction. In addition, Larka performed the quality and regulatory due diligences.

The Pharma & BioTech industry is so complex. Why do investment firms choose Larka to support them?

I think the answer is in the question. They choose Larka because the BioPharma industry is – increasingly – complex. The supply chain is very fragmented, the value chain is highly complex. Quality systems and Regulatory environment are very demanding. R&D and Manufacturing processes are more and more specialised. In the meantime, the industry is changing dramatically, from established, large-volume products to innovative, personalised therapies, along with a challenging socioeconomic environment. So, in the end, it makes the whole decision-making process complex, while Larka makes it simple, clear,  and easily understandable.

How do you make it simple?

To answer this question, we should look at Larka’s origins.Larka was founded in 1993 by an industrial pharmacist and is exclusively dedicated to Pharma & BioTech industry since then. At that time, our services was focused on ‘Industry’ consulting, addressing all scientific, technical and industrial challenges related to Bio/Pharmaceutical products and covering the whole value chain – which involves a wide variety of Contract Services Providers such as CROs, CDMOs or CMOs.In 2003, Larka launched its Strategy division to complete and expand its offerings. Combining corporate strategy and M&A with a deep knowledge of all scientific and technical aspects of the industry quickly made us very relevant and successful, especially when compared to non-specialised consulting firms.Therefore, I believe that it’s our industry DNA combined with high value-creation strategic advisory that allow Larka to make our clients’ decision-making processes simple and digestible.

Could we say that Larka is a recent player in the Private Equity landscape?

We are. Larka was approached by PE firms for the first time in 2010, but at that time, we only had an opportunistic approach of M&A assignments for financial players. It was only in 2015 – after being successful in offering insightful and didactic due diligences, sell/buy-side – that we decided to be ‘commercially’ proactive towards PE firms. This division has been skyrocketing since then.

So, what is next for Larka?

We recently introduced M&A advisory services, which, when combined with our knowledge of the BioPharma industry and its most relevant buyers, positions us as the right partner to support sellers in their exit or funding strategy.

Foresight Group LLP (“Foresight”) announced the acquisition of 100% of the equity of Simple Power Limited (“SPL”) for an undisclosed sum, comprising a portfolio of 52 onshore sub-250kW single wind turbines located across Northern Ireland.

SPL has the largest distributed wind portfolio in Northern Ireland, with a total output in excess of 12MW across all the turbine sites, which benefit from some of the highest wind speeds in Europe.

The 52 wind turbines are fully operational and OFGEM accredited. The portfolio qualifies for participation in the recently launched I-SEM market in Ireland. Each turbine benefits from a standardised lease, grid connection and PPA, with long-term fixed price O&M agreements in place with a number of experienced third-party contractors.

In the past five years, Foresight has mobilised investment of more than £200 million into the Renewable Energy sector in Northern Ireland building a portfolio of 12 Bioenergy and Waste projects alongside this wind portfolio. Together, these projects generate enough clean energy to power the equivalent of some 66,000 homes, and Foresight has a strong pipeline of opportunities in Northern Ireland for future deployment.

Deloitte’s role covered financial DD, tax DD, tax advisory and transaction structuring; all led from their Belfast office.

Most of Nitin’s career has been involved with business model changes around disruptive technologies and M&A work in the TMT sector for companies around Silicon Valley. He has developed M&A strategies, conducted commercial/operational/technical due diligence and has assisted with M&A integrations and separations for his clients. He specialises in creating value from emerging technologies and helping his clients prepare and adapt to the next big thing. A veteran with over 1,000 transactions, he specialises in revenue synergies and has also led dozens of cost-focused consolidation M&A deals. His recent work includes helping CEOs, boards, investors and business leaders transform their business models by leveraging disruptive trends and M&A to pivot into new business models, utilising technologies such as SaaS, SDN, blockchain, open source, AI, IoT, AR/VR, drones and voice-enabled devices.

“As a Silicon Valley insider for two decades, it is a fascinating challenge to utilise my business knowledge, network of experts, consulting skills and experience in M&A deals to solve problems at the cutting edge of new technologies”, says Nitin. “I have built an expansive network in Silicon Valley with TMT sector clients who look to me to help them through difficult business changes, serving as both a trusted adviser and personal advocate.”

 What are the current key business and technology trends within the TMT sector?

I believe that today we are experiencing the equivalent of tectonic shifts in business that are primarily technology-driven and are impacting the fundamental ways we do business – and these trends extend far beyond the technology sector. These shifts can conflict with each other, making business strategy more difficult to conceptualise and execute today than it was in the past. Some of these shifts are as follows:

• Product to cloud vs. cloud to edge;
• Centralise (SDN/NFV) vs. decentralise (e.g., blockchain);
• Players who monetised voice are now monetising data (e.g., telcos), while those who monetised data are now monetising voice (e.g., Google, Amazon);
• Brick-and-mortar stores to an omni-channel retail economy, or ‘bricks-and clicks’;
• Closed-source to open-source (Android);
• Human to machine (AI);
• Real to virtual (AR/VR); and
• Building traditional enterprises vs. monetising ecosystems.

Each of these shifts is a transformation that presents an opportunity to get ahead of the game.

There are few absolute rules in this new frontier – companies need a data-driven approach to navigate the complexity, uncertainty and ambiguity, which has become profound over the last few years and is not likely to abate.

Traditionally, technology has served to enable or enhance existing business models or to create entirely new ones. More recently, we find ourselves in a place where there is a developed technology, but the ecosystems and business models around it are taking longer to evolve. Take, for instance, blockchain – here we have a viable technology, but it will take a few years to build scalable business models around it and monetise it. CEOs and corporate think tanks must devise new ways of adapting in such a landscape.

I have built an expansive network in Silicon Valley with TMT sector clients who look to me to help them through difficult business changes, serving as both a trusted adviser and personal advocate.

How is FTI positioned to take advantage of these so-called shifts and disruptions in the market?

FTI is configured differently than traditional consulting firms because we have an expert-centric approach to creating value for our clients. Most of our practitioners have deep industry experience, having operated businesses as executives and in consulting for several years, which has created a lot of credibility with clients and other executives. We are also an industry- and sector-oriented firm and taking a profitability view of the business is a highly valued and impactful perspective for our clients. We not only understand the sector, trends and structural shifts, but can also translate those into meaningful operational and tactical outcomes. Our clients tend to hire us for our expertise and experience rather than to simply add leverage to their internal teams. Given the highly sector-focused approach, we tend to formulate points of view on what is coming next, to ensure our clients are well prepared to adapt.

You have quite an amazing M&A background as well. What are key current M&A trends and drivers in the sector?

There is a lot going on in the M&A world. The last two years have been record-breaking, with unprecedented deal activity across industries, geographies, private equity and corporates. While there is some rumbling that M&A is slowing, I think that the big drivers are intact. For one, the US dollar has appreciated significantly against some developing market currencies, and that creates an interesting value discount. The 2017 tax cuts will continue to put more money in the hands of corporates, which will likely fuel M&A activity. The wave around digital business models is not cresting, and companies will acquire or strengthen their capabilities in this space. Incumbents will continue to consolidate to survive and create scale.

All these trends have put pressure on internal M&A teams and external advisers to create more value and to do it quickly. M&A integration has gone through a lot of change, and many professionals have still not adapted to the structural integration aspects and approach it ‘function-by-function’, limiting their ability to create value. There are several industries and sectors where the M&A wave is just starting – the scaling of technologies such as blockchain and AR/VR will attract preemptive strikes from bigger players. Private equity firms continue to be aggressive and are developing some unique strategies for deploying capital and creating value. When you consider all of these trends, I don’t think that M&A activity in the sector will slow down appreciably anytime soon.

The last two years have been record-breaking, with unprecedented deal activity across industries, geographies, private equity and corporates.

How do you go about keeping up with all the trends in the market while continuing to build skills and reinvent yourself?

This is an important aspect that has become critical if you want to stay current, relevant and excel. Learning patterns, adapting and creating value for the entire ecosystem around you is vital when working within this field. Gone are the days when one could read a few books or attend a couple of training sessions to grasp a new subject. Our clients are very smart people and they have access to a vast collection of materials and resources.

The way I have adapted is by learning from my network. For example, I learned about autonomous driving by speaking with approximately 50 companies across the value chain. By the time I spoke with a couple of dozen players, I started seeing patterns and trends that they were not able to see individually, such as partnership opportunities, M&A opportunities, market needs and disruptive trends.

After you’ve networked, it’s about building insights and getting into more details through targeted discussions around specific areas of autonomous driving. Clients value market insights and trends from external sources as validating. I did something similar with blockchain and IoT previously. One can always dress up their credibility with technical credentials, but this is usually less effective than learning from the field and building insights and skills from it. People are also curious about what others are thinking and doing, hence forming a cohesive, defensible, fact-based point of view often goes a long way.

Gone are the days when one could read a few books or attend a couple of training sessions to grasp a new subject.

It is widely believed that you are one of the most connected C-Level Executives in the TMT sector. How have you built such an impressive network?

Great networks are always built over time. It is easy to make connections, but it’s a lot harder to maintain them. I like connecting with people in general and I like exchanging ideas and facilitating with them – be it making introductions, sharing insights, learning from them, advising them or being helpful otherwise. Not all meetings have to be about getting something out of them – be genuine, take interest, help if you can and I guarantee that will deepen your relationships with them. I always tell people that if your relationships are strictly an outcome of your business, then something is not right, but if your business comes to you as a byproduct of your relationships, then you are doing it right. Remember, it is about the quality and strength of your network – not the numbers. It takes a lot of commitment to genuinely foster and maintain a network as it gets bigger. Your network is like a living organism and it needs to be nurtured in order to strengthen and grow. There is not one magical formula for this; everyone has different styles, but it is important to know what works best for you. The crucial element is to put yourself out there in the field.

You have received multiple awards for pioneering new approaches in M&A – please tell us about them.

The most important outcome is to innovate and adapt – awards are only a byproduct of that but, of course, serve as a validation and recognition of your contributions. Some of my work that has been externally recognised is creating a new framework for delivering revenue synergies in M&A, a new approach to managing M&A from strategy through integration by utilising Wargames - a new and unique way to assess blockchain and understand how to unlock its business model value. Additionally, I am currently working on building a new approach to assess and integrate platforms, which requires a different approach from integrating products or processes. When it comes to platforms, the bulk of value created is outside the company and delivered through network effects. Stay tuned for more on this topic.

How does one go about generating new business in today’s world? Has the approach to sales changed?

I think the best way to sell nowadays is to be visible in the right places, share insights and experiences to create a ‘pull effect’. You can no longer just show up and talk about the services your firm offers and wait for the client to bite on something relevant. More specifically, today’s clients judge your expertise by how well you understand their business, trends and context apart from your technical or functional area.

Today’s clients judge your expertise by how well you understand their business, trends and context apart from your technical or functional area.

My field is highly relationship-driven – the deeper you know your topic, the more amplification you will get from the network or relationships in order to get referrals. We don’t live in an age of long attention spans. If you meet the CEO of a company in the elevator, speak about business issues relevant to him. If what you’re saying resonates, you’ll have plenty of opportunities later to talk about how great your firm is.

You also sit on boards of multiple companies – can you tell us about them? How do you choose the companies that you join?  

Foremost, I need to genuinely believe in what the company does and that I can really add value. I am always happy to help talented people with my ideas, skills or network. A great idea is unlikely to succeed without great management teams, and resonating with these people is a key consideration for investing time.

I’m also attracted to disruptive technologies that could have a big impact on the business world. Some of the companies that I am a board member of include Pronto, a partner orchestration and automation platform; SmartBeings, an AI based smart speaker focused on enterprises; and Crosby, a blockchain-based asset tracking technology which is unique and differentiated.

What is your advice to CEOs and how do you adapt to changes in today’s world?

• Get comfortable making frequent or sudden pivots. Never get into a comfort zone or be complacent, even when you are ahead of your competition.
• Find builders and give them responsibility, authority and accountability.
• Develop foresight and skillsets to navigate business complexity and strategic ambiguities.
• Move away from intuition to data-driven decision making wherever possible.
• Build ecosystems and develop skills to monetise them. There is no need to own the value chain, but you should learn to have a specific and influential role in it.
• Continuing with traditional approaches will not change much.
• Invest in continuous and fast-paced learning.
• When it comes to the organisation, be agile and respond quickly.

What is your advice to the Management Consulting community on how they should adapt to the changing landscape?

• Understand the changing business landscape and identify your niche, skills required and ways to play.
• Look at ways to adapt your skill set and see how you can create value as the next big thing surfaces.
• It is about constant learning, reinvention and reorientation of your skills.
• Bring data, facts and insights into everything that you do and put yourself out there.
• Your network is a vehicle to engage, learn and amplify your personal brand – reach out to people and create avenues to exchange value.
• Client relationships are for life. Stay engaged and avoid tendencies to move on after your successful project.
• Adapt your thinking from pure enterprise or client to the ecosystem itself – you will discover more ways to add value for your clients.

VILAF advised Vina SCG Chemicals Co., Ltd. (“VSCG”), its wholly-owned subsidiary of Siam Cement Group, in a sequence of transactions to buy out 25% and 29% of the equity stakes in Long Son Petrochemicals Company Limited (“LSP”) from Qatar Petroleum and PetroVietnam respectively. The chain of transactions was completed in June 2018.

The transactions increased Siam Cement Group’s equity stakes in LSP from 46% to 100%, of which VSCG holds 82% and Thai Plastic and Chemicals Public Co. Ltd holds 18%.

Long Son Petrochemicals project, located in Vung Tau City (100 km from Ho Chi Minh City), is a key petrol and oil project of Vietnam.  Long Son is the third petrochemical complex in Viet Nam after Dung Quat oil refinery and Nghi Son oil refinery and petrochemical complex.

Licensed in 2008 with an initial investment capital of $3.7 billion, the project has raised up to $5.4 billion in investment.

From VILAF, Partner Vo Ha Duyen advised VSCG in both transactions with the support of Counsel Trinh Luong Ngoc.

Claranet, a European leader in the hosting and management of critical applications, has announced the acquisition of Italian DevOps and cloud specialist XPeppers.

Founded in 2010, XPeppers is a value-added systems integrator specialising in AWS managed services, DevOps and Agile technologies. Having built strong relationships with a number of large businesses, XPeppers has become a respected partner for customers who need to manage critical applications through AWS and is also an AWS Partner Network (APN) training partner. Its expertise in DevOps and Agile tools also gives it the critical capabilities to help customers manage digital transformation. XPeppers has an annual turnover of around €4 million, with its customers including Conde Nast and Mercury Payments.

This latest merger has enabled Claranet to further strengthen its AWS offer in the Italian market and confirms the Group’s position as a natural leader in the public cloud market in the rapidly growing European market. This is in line with Claranet’s ambitious expansion strategy, which has seen the Group grow rapidly in Europe in recent years, both through organic growth and acquisitions. XPeppers represents the latest of these acquisitions.

Law firm Masotti Berger Cassella acted as Claranet’s tax and legal adviser. Key individuals that assisted with the transaction were Partners Luca Masotti and Francesca Masotti and Associates Matteo Castronovo, Barbara Bertini and Giuliano Gadiva.

Masotti Berger Cassella acted as legal adviser to Americas Power Partners, an American company part of the Armstrong Group, in its acquisition of Sammartein Biogas Società Agricola. Based in the US, Americas Power Partners, Inc. engages in generating electricity, primarily utilising cogeneration technologies. The company focuses on developing domestic industrial cogeneration plants that produce electricity and thermal energy for sale under long-term contracts with industrial and commercial users, power wholesalers, and public utilities. Based in Modena, Italy, Sammartein Biogas Societa' Agricola owns and operates a biogas plant.

Masotti Berger Cassella’s team included Partner Mascia Cassella and Associates Stefano Del Vecchio, Roberta Brussolo and Matteo Castronovo.

The transaction is part of Americas Power Partners’ larger investment project in Italy, which will include a series of biogas plants acquisitions.

The merger and acquisition market is on track to hit record levels in 2018. According to Mergermarket, the first half of the year saw 8,560 deals recorded globally at a value of $1.94tn, with 26 deals falling into the megadeals category of over $10bn per deal.

While M&As present incredible value for businesses, many organisations don’t put much thought into what happens after the documents are signed, says Neerav Shah, General Manager EMEA at SnapLogic. As a result, he continues, many past M&A deals have failed to live up to their promise, with organisations struggling to manage the cultural and technological challenges associated with these deals.

The landscape is littered with unsuccessful mergers and acquisitions, companies that did not heed obvious risks that, in retrospect, were avoidable. Instead, dealmakers focused on the benefits of the transaction, such as prospects for a larger market share, competitive advantages, reduced costs, increased efficiencies, and more diversified products and services.

While the opportunities need to be at the forefront of any deal, organisations need to also address the potential risks and challenges if they want to realise these opportunities. This means integrating newly merged companies effectively, and quickly, should be of paramount importance once a deal is agreed in order to keep critical functions operating at full speed during the post-transaction integration period, realise operational synergies in the ongoing merged entity and to align all employees around a single, merged corporate identity.

As consulting firm McKinsey put it: “Integrating merging companies requires a daunting degree of effort and coordination from across the newly combined organisation… Those that do integration well, in our experience, deliver as much as 6 to 12 percentage points higher total returns to shareholders (TRS) than those that don’t.”

The considerations for integrating the companies typically fall into two main areas: cultural and technological. While the first is an obvious challenge, merging two completely different company cultures, consolidating technology and data often proves to be a more complex task, not least because of the increased level of vulnerability to cyber security incidents both organisations will have during this process.

The sheer number of IT systems and cloud applications in use by companies today, also makes the process of integration more complicated. These days it’s not uncommon for a company to have inked partnerships with more than a hundred different cloud providers. When two organisations combine, integrating all the applications, systems and other sources of data consumes an inordinate amount of time.

Obviously, there is a need for data integrations to occur quickly and seamlessly, minimising the time in which the oceans of data flow from one system to another, from one application to another. Many companies are still struggling to integrate the data they hold within various systems in one company, so when two are involved they need to take a very process-driven approach to not only ensure that security isn’t compromised but also that the most can be made from the data.

Best practices include identifying all the data assets that need to be transferred first, and then determining the specific data standards, policies and processes that will be used to conduct the transfer. Rather than transferring all the data at once, consider a piecemeal approach in which different data sets are prioritised for transfer at different times. Both the finance and HR departments are good areas to start due to the importance of the data they hold in relation to not only business performance but the deal itself. Data that is not destined for transfer should be immediately destroyed.

Lastly, invest in integration tools that make it fast and easy to connect applications and different sources of data. Legacy technology requiring teams of developers to handcraft integration software on an as-needed basis is no way to address today’s rapidly expanding universe of cloud applications.

Companies undergoing a merger or acquisition need to find a fast and easy way to integrate data and applications. They need a single platform that users can rapidly connect diverse systems and applications at their vulnerable intersection points, narrowing the window of opportunity for hackers to attack.

By ensuring data transfers are closely managed so they can flow at enterprise speed, the pace of post-transaction integrations is accelerated. In turn, this assists dealmakers to realise the perceived value of the merger or acquisition at a much quicker rate—adding up into a rare win, win, win.

Tapia, Linares y Alfaro (“Talial”) through Linklaters LLP, London, advised a group of Banks on a high yield bond offering by means of which Blackstone would finance a portion of the acquisition price of Cirsa Gaming Corporation S.A (“Cirsa”). LHMC Finco S.à r.l., a Blackstone special purpose vehicle, has completed a Rule 144A and Regulation S offering of €1.5 billion (equivalent) of euro denominated and dollar denominated Senior Secured Notes.

Talial first assisted the Blackstone Group, through Urina Menendez, London, with multi-jurisdictional legal due diligence regarding Cirsa and a selected number of its direct or indirect subsidiaries. Talial performed legal due diligence on all of Cirsa Gaming Corporation’s Panamanian subsidiaries and assisted Blackstone in obtaining the necessary governmental authorizations and all Panama Law related matters.

Later, Talial was also contacted by Linklaters LLP, London, to advise the group of Banks (initial purchaser) involved in the transaction on Panama Law related matters and the issuance of bonds.

Talial’s  Due Diligence M&A team was led by Fernando A. Linares, with the assistance of  Eloy Alfaro de Alba, both partners of the firm, and other firms’ experts in the corporate, regulatory, labour, taxation, intellectual property, real state and compliance fields, among others. Partners Eloy Alfaro de Alba and Fernando A. Linares also assisted with the financing part of the transaction (bond issue).

Baird Capital, the direct investment arm of Robert W. Baird & Co., announced that it has acquired a majority interest in Collingwood Lighting (“Collingwood”). Collingwood is a leading designer and supplier of residential, commercial and exterior luminaires into the professional refurbishment and new-build markets in the UK and France. Baird Capital Partners James Benfield and Dennis Hall will join the Collingwood board of directors.

Collingwood is headquartered in Northamptonshire, England. The Company’s strong position in its markets is underpinned by its products’ energy efficiency, innovation and quality alongside the high levels of service the company provides its longstanding customer base.

“We are delighted to bring Collingwood into the Baird Portfolio. Its high quality products fit well with our energy efficient products strategy and our global portfolio resources are well positioned to help expand the business and optimise its global supply chain. Collingwood is committed to continue to invest in innovation and technology as lighting maintains its central position within intelligent and connected built infrastructure”, said James Benfield, Baird Capital Managing Director.

Steve Grao, Collingwood CEO commented: “We are excited to work alongside Baird Capital. Their culture is a strong fit with Collingwood and their expertise and global resources will be invaluable as we focus on driving future innovation and growth”.

Humatica provided organisational due diligence services for this transaction.

Interview with Patrick Mina, Managing Partner, Humatica

Can you tell us about Humatica’s involvement in the transaction?

We conducted an organisational due diligence which identified the key organisational bottlenecks for Collingwood to take on and execute a significantly more aggressive growth plan and adapt to a faster paced, numbers focused private equity environment.

What was your specific role?

Humatica has been conducting organisational assessments over the past 15 years and built up a proprietary database of behaviours and management processes that drive accelerated value growth. These are tested in structured interviews with management team members using a maturity model i.e. what good looks like for a company at that stage of evolution, in that type of industry, with that type of value creation plan. We also use targeted data analysis from the data room and other sources, psychometric assessments (where feasible) and deal team interactions to gain further insights.

Based on this approach, we identified to what extent the current “baseline” operating model, management and operational processes were scalable and, at a sufficient level, not to have to spend a disproportionate amount of time initially fixing the basics versus growing the business. We also identified the support the management team might need in identifying required organisational changes to their operating model, management and operational processes to deliver the value creation plan on or ahead of time. This involved highlighting any potential skill and behavioural gaps that the management team would need to address to operate as a high performing team on an ongoing basis in the context of an ambitious growth plan.

What were some of the key challenges you faced and how did you overcome them?

We weren’t faced with any challenges apart from some initial scepticism from the portfolio company as to the purpose of our organisational due diligence. This was however allayed once it became clear we were focused on identifying potential bottlenecks and ways to address these to enable them to successfully deliver the value creation plan on time.

A decade on from the great financial crisis and the fall of Lehman Brothers and Europe’s financial services is the only sector not to have returned to pre-crash levels. Below Finance Monthly hears some expert commentary from Beranger Guille, Global Editorial Analytics Director at Mergermarket, an Acuris Group company, on the current state of European M&A in the Financial services sector.

Despite an appetite for large-scale banking mergers and an eagerness to create pan-European banks capable of challenging rivals across the Atlantic, Europe still operates under strict rules that have so far prevented such merger ideas from materialising.

Between 2006 – 2008, Europe saw a total €607.9bn change hands across 1,592 deals. Since 2016 to date, activity remains still nowhere near these pre-crisis levels, with a mere €221.1bn traded over 1,251 deals and a spectacular absence of mega-deals that were once a prominent fixture in the build up to last financial crisis.

10 years later

A decade on from the crash, regulators continue to introduce new rules on top of what is already a very comprehensive rulebook. Basel III and Solvency II: the first ever set of rules on liquidity, placed a robust set of capital requirements on banks and insurers, with additional process still not complete. The capital conversation buffer, which ensures banks build up capital reserves to weather losses incurred during downturns, will take effect on 1 January 2019. In 2013, The European Market Infrastructure Regulation (EMIR) drove the centralised clearing of derivatives and promoted robust reporting requirements to trade repositories. While most recently, the Markets in Financial Instruments Directive (MiFID II) and Central Securities Depositories Regulation (CSDR) has pushed more transactions to occur on exchanges to improve transparency and the overall efficiency and safety of securities settlement.

In the build up to the crash, Italian lender Unicredit conducted a string of mergers between 1998 – 2006, while Royal Bank of Scotland spent €71.1bn acquiring Dutch lender ABN Amro on the eve of disaster. Both left shareholders and taxpayers alike reeling from heavy losses.

The current situation

Today, mega-mergers are once more mooted with cross-border deal discussions between Unicredit and Société Générale reportedly taking place. However, “there is nothing on the table,” according to France’s Minster of the Economy and Finance, Bruno Le Maire.

There is also talk of potential national mergers afoot. In the UK, Barclays chairman John McFarlane is eager to do a deal with Standard Chartered, while German lenders Deutsche Bank and mull a merger of their own.

But, despite an apparent eagerness to get deals done, there is a lot of cold water that investors and analysts are only too quick to pour on such tie-ups.

There is a lack of strategic rationale behind a Barclays-Standard Chartered deal, with two banks having little to no geographical overlap, with the former boasting strong ties in the UK and US and the latter firmly focused on emerging markets in the Asia and Africa. Meanwhile, discussions between Deutsche Bank and Commerzbank certainly offer a stronger rationale, but it should not be forgotten that Deutsche Bank launched a €8bn rights issue – its fifth capital hike since the crash – to plug holes that continue to leak.

A political climate

Given the political environment in the EU, and that there is a degree of nationalism when it comes to banks, large-scale cross-border deals look anything but likely. Two years ago, Swedish lender Nordea made an approach to acquire ABN Amro but had its offer slapped down by the Dutch government. Some bankers were even brazen enough to pitch a merger between Barclays and Santander. Cross-border European deals for the time being at least seem off the table, but domestic mergers could provide dealmakers something to chew on.

The timing of renewed merger talks is interesting, with the next cyclical downturn expected to come to bear in the next two years.

Calls for consolidation amid so much uncertainty is cause for concern, but desperate times lend themselves to management contemplating desperate measures. Weak profitability is putting pressure on banks to take action at a time when big tech, fintech and alternative lenders threaten to grab market share. And while the appeal of cross-border mergers may provide a boost to the sector's profitability, bigger banks, history tells us, are not necessarily healthier banks.

To hear about valuations and middle market M&A, Finance Monthly reached out to the experts at IBG Business.

IBG Business exists to bring merger and acquisitions skills, resources and knowledge to middle market business owners selling (or buying) businesses. “The firm is defined by its expertise, character and commitment to delivering exceptional results”, says IBG Oklahoma Managing Partner and Principal John Johnson. “Our team brings extensive background, robust training and deep resources to each deal. Time and again, the precise execution of our refined professional process has yielded maximum value under optimal terms and timing for our clients.”

Owners should seek professional help prior to selling a business or planning an eventual exit. IBG Denver Managing Partner and Principal, John Zayac, explains the complexities sellers face: “Price is often a starting point in the discussion, a common marker for value. However, it is only the tip of the iceberg. Price is predicated on a complex foundation of components including shifting responsibilities for risk, tax treatment and intangible values, all of which may move dramatically as a sale is negotiated”. Regarding the question “What is my business really worth?” Gary Papay, IBG Pennsylvania Managing Partner, also asks “And why?  Knowing the reasons underlying the value of a business can reveal value-enhancing improvements or set up better initial positioning of deal terms.”

Casual opinions of what a business is worth are as abundant as sparrows. Those opining rarely have knowledge of the particulars of the business, the deal terms, an understanding of the sector or any transaction expertise. All are imperative to formulating a competent view on value. Sellers often reach out to valuation specialists for a fair market value opinion, but these regimented, theoretical valuations - while an improvement on sparrows - are better suited to litigation, divorce, or estate planning.

The most useful guidance for prospective sellers will combine sophisticated appraisal techniques with recent ‘boots on the ground’ experience on actual transactions. A market-informed opinion of the value of a business will gauge how potential buyers might respond to its sale. The opinion should provide a range of values, articulate what factors underlie the opinion, and comment on possible impacts of different deal structures. Strategies to minimise obstacles and enhance value may be offered.

Seasoned mergers & acquisitions advisers can also expertly evaluate and manage the nuances and practicalities that arise in the ‘real world’. In any transaction, the buyer and seller have opposing goals: each seeks to best serve their own interests but must ultimately acquiesce in some part to the other while retaining sufficient benefit for themselves. The odds of success in this process dramatically improve when it is proactively managed by a seasoned professional who can keep polarising realities within a cooperative framework. The parties will also be more likely to work well together post-close.

Pre-sale valuation work and pro-active management of transactions are key, but subtle dynamics and market factors unique to a deal can also be vital determinants of value. IBG Arizona’s Principal and Managing Partner Jim Afinowich and Managing Director Bruce Black recently worked on a deal that perfectly illustrates such market dynamics. The client’s firm, a niche food manufacturer, initially might have had a competent fair market value of around $20M. IBG perceived growing demand in the industry vertical, and thought an opportunity existed with the evolving market dynamics. They advised the client to decline early offers and to continue to build value in the business. Improve it did, but IBG’s “read” on the market and recommendation on timing made a tremendous impact for the client:  a buyer seeking market control and expansion in the vertical ultimately out-bid several competitors to buy the company for the cash price of $120M. While such extreme opportunities are uncommon, the “savvy” of a seasoned dealmaker can radically impact what is already one of the biggest financial events in the lifetime of a business owner.

Business owners must understand optimal timing and valuation complexities prior to any sale. Today, demand remains robust for quality middle market businesses and valuations are still excellent, but a cooling in the market is anticipated. Active mergers and acquisition broker and advisory firms prepared to assess opportunities with a ‘real-time’ read on transaction market remain the most vital resource for owners seeking to sell for top value.

Contact details:

Email: jim@ibgfoxfin.com

Web: www.ibgbusiness.com; www.ibgfoxfin.com

Direct: 480 327-6610

Main: 480 421-9789

Fax: 602-792-3811