Mergers and Acquisitions: a post-deal review

To take advantage of various investment opportunities in India, several international corporates have established their presence by entering into M&A transactions with their Indian business partners. These corporates resort to inorganic routes for diverse reasons, ranging from expanding footprints to backward/forward integration. The basic tenet is the expectation of synergy gains by the merged entity, in the form of increased revenues, cost savings, debt restructuring, increased enterprise value, pre-empt competition, tax planning, etc.

During the Mergers and Acquisitions process, reaching a consensus among all the stakeholders can be arduous and is fraught with negotiations and managing expectations. This, alongside complying with all the applicable regulatory requirements, means that it often takes substantial time & resources from the initial discussions until the new enterprise structure is established. Thus, it is important that the investment in the process actually fructifies.

However, in reality, the anticipated synergy gains are seldom realized. Per a survey, in more than half the cases, combined enterprise value actually declines within a year of closing the transaction. A review of such transactions reveals certain factors that need to be kept in mind, some of which are:

1. Entity structure: The buyer’s and the seller’s rights need to be in accordance with the extent of control over key decisions that they desire to have. It is also important to be assertive about the exercise of such rights. In particular, the entry strategy for international companies needs to be evaluated from this perspective to prevent any setbacks later on.

   
   

2. Post-deal integration path: A thorough plan for integrating the business of the seller with the buyer’s group structure is essential. This requires that the acquirers spend the necessary time to understand the business of the sellers, their vision, and how they are placed in the industry. However, in most cases, an investor-driven approach is followed without considering the dynamics of the inherent essentials of the acquired business. To avoid a showdown during the integration process, it is a must to capture the inherent commercial aspects, identify the gaps vis-à-vis expectations, and guide the process through to achieve desired results for increasing shareholder value. A seamless integration process is a must to keep the value of the business growing and have an eventual transfer of control to the buyer without any unwarranted situation with the sellers.

   
   

3. Tracking performance: Many transactions are structured wherein the total consideration is divided into performance-linked tranches. This, in turn, relies on the reports/MIS submitted by the erstwhile management. The reliability of such reports needs to be established through meticulous supervision and observance. This is necessary particularly during the early stages of integration and in transactions where the buyer management is overseeing operations from distance or in the case of a cross-border transaction where the accounting practices are different.

   
   

4. Actual performance: Conduct of due diligence does not mean that the acquirer can be assured of the future value that the seller business would generate. Typically, a mismatch of pre-deal and the post-deal value is observed, primarily due to variance in the actual results. Scenarios like unrealized targets, attrition of key staff, changed market scenario, diluted interest of erstwhile management, etc. are some of the key reasons for underperforming investment and need close supervision at each stage of the business, starting from the beginning before it gets too late.

   
   

Reviving stagnant investments

A situation may arise that either or both parties to a transaction become dissatisfied with the extant structure. This may be due to limited transparency, underperformance, process mismatches, limited operational control over the business, lack of growth, uncertainty regarding exit plans & valuations, etc.

To resolve these situations, it is usually very useful to have an independent, third-party perspective to define the way forward or to implement the defined strategies.

We at GM Corporate Solutions specialize in financially & strategically advising our clients in bridging the gap between the expectations and the results. Our rigorous and process-oriented approach helps determine a clear roadmap to accomplish the desired integration. We focus at turning around the business to realize the latent value, typically by supervising on reporting and as an expert board observer to achieve the intended outcomes.

M&A Advisory Services in India

With ever growing M&A space in India, there has been a continuous need for good quality M&A advisors in India. With increasing number of companies adopting inorganic route to fuel their growth strategy, it is crucial for them to identify the relevant opportunities to match their growth path, to identify the existing opportunities in relevant domain and appropriate fit with in investment size of the investor. To ensure that these criteria are met, the investor companies often need support from team of strong M&A advisors in India and get necessary support starting from identification of relevant business opportunities in India. For an international investors having no prior experience in Indian market, M&A advisors in India plays a very important role in handling the most of the crucial parts of the transaction, starting from scouring the buyers/sellers, support in discussions, review of documentation and taking the transaction to conclusion. Ensuring that the investor is capturing correct investment opportunities in India, is a typical function of merger and acquisition advisory firms in India

Enumerated here are some of the key elements which are typically supported by financial advisors in India.

The cause and effect relationship

Any investment decision is taken for few key reasons, namely to eliminate/reduce competition, to increase the market share, for expanding into new arenas or to integrate some of the activities of the business with target company to increase the capacities and profitability of business. Any M&A transactions can be tricky unless planned very carefully and thus requires a deep know how on industry dynamics, investor’s expectations with the market & such investment and very clear understanding of business evaluation strategy to ensure the key parameters for investment are met in long run. To ensure that there is a clear strategic alignment of interests of the stakeholders with proposed business to be acquired, experience of M&A advisors in India comes very handy.

Regulations Proficiency

M&A transactions in India or in any country typically required to be in line with applicable regulations in the home country. Financial Advisors in India provide assistance in the process on various government regulations on the sector before investments, Company Law requirements, Foreign Exchange regulations, SEBI provisions, Income Tax and GST regulations etc, as the case may be. A M&A advisory Firm in India , who is well versed with these regulations can provide a structured framework for execution of transaction and required permissions from Government. Similarly, assistance from Tax Consultants in India is generally required by international investors to get a clear view of applicable taxes in India on such transactions. M&A advisory firms and India may come with a complete perspective to provide full range of services as above.

Investment growth and Exit strategy planning

In order to ensure growth over the life cycle of the investment and to plan the right time to exit, it is imperative that the planning beings before the ink dries up.An investor should have an exit strategy outlined, at the time of making the investment. This makes the requirement for M&A advisors in India even more important to support the investors in this meticulous planning.

GM Corporate Solutions

We are one of the specialist financial advisors in India, providing consistent services in transaction advisory space. GMC being one of the leading M&A advisors in Delhi is fully equipped to provide support to the international investors in full cycle of acquisition process. Our team’s deep experience in taxation matters makes GMC a leading Tax advisory firms in India. Our experts have capabilities to provide assistance at every stage of transaction till execution of exit strategy, which helps us become one of the trusted Financial Advisors in India.

Looking to Invest in India? Why Hire a Financial Advisor

Emerging markets like India present exciting investment opportunities for investors and companies looking to expand their global footprints and enter in to high returns growth markets. In addition to fast growing economy, investment opportunities in India are enormous due to its large consumption base, increasing industrialisation and surge in spending capacity. Companies who open their offices or nvest in India are able to participate in high-growth prospects and get access to qualified & cheaper resources to run the operations.

Like other countries, to tap the investment opportunities in India, it requires a detailed ground work and research to capture the pre-investment parameters for investors and their shareholders. Foreign companies and investors typically require support of Financial advisors in India to carry out an analysis on their business plan and adaptability of such plan under current market scenario. Financial advisors in India, also ensure that such investment is directed & managed suitably to satisfy the needs of the investors who invest in India. Pre-emptive analysis on yield & desired returns is one of the other supports which could be expected from Financial advisors in India before while exploring Investment opportunities in India.

Post investment, the services of financial advisors in India are typically obtained to ensure timely compliances and to be conversant with changes in law. Assistance could also be sought from the financial advisors in India to make appropriate structure for the taxes in India and to overcome any surprises and bumps that may come along the way that companies may not even have thought of before they invest in India.

We at GM corporate Solutions are a team of professionals providing pragmatic solutions to enable our clients to gain a competitive edge in challenging market environment. As market entry specialists, we render end-to-end long-term support framework. Our typical engagement starts at a level when companies are contemplating India as a new market, through to the point where they are fully established and on their growth trajectory in the ongoing years. We specialize in corporate finance and strategic advisory services and act as trusted advisors to our clients in domestic and cross border M&A deals across diversified sectors/industries. Our team supports through all phases of the process – from identification of buyer or seller to closeout and post deal integration.