Business acquisitions: supporting visionary entrepreneurs
The pandemic has not slowed down mergers and acquisitions in any way; quite the opposite. "We're seeing many transactions at high multiples; sellers are better informed; the M&A process is much shorter; there are more potential buyers and financing conditions are very attractive," says Sébastien Sauvageau, Investment Director, Entertainment and Consumer Goods, at the Fonds de solidarité FTQ. In such an environment, here are a few tips from our experts to help you see clearly.
Patient capital and business financing
When evaluating an M&A project, the Fonds looks at the same criteria as the buyer: synergies between the companies, the teams in place, the product complementarity, geographic diversification, financial health, etc. "As a patient capital partner, the Fonds' goal is to create long-term value and economic spinoffs for Québec," explains Benoit Leroux, Investment Director, Services.
The Fonds' financing solutions are tailored to the objectives of the transaction using various financial instruments such as unsecured loans, quasi-equity and equity.
"To successfully complete and integrate an acquisition, the company has to remain financially flexible and have enough liquidity to cope with market fluctuations," says Benoit Leroux.
Too high a selling price, overestimated synergies, out-of-control transaction costs, incompatible cultures, disruption of current operations: there are many pitfalls for entrepreneurs venturing into an acquisition project alone.
"Besides the money, the support offered by the Fonds generates considerable added value by providing access to teams of sector and multidisciplinary experts," adds Sébastien Sauvageau.
"In addition to an investment director, each file is supported by professionals covering all the key facets of a transaction, from legal to market aspects, valuation and financial analysis, not to mention human resources, taxation and due diligence."
Support: sooner is better than later
When a company seeks the Fonds' support early in the process, it's in a better position at every stage. "It's never too late to approach us, but having the Fonds, with its net assets of $17 billion,* as a partner, adds a great deal of credibility when convincing a seller," concludes Sébastien Sauvageau. Once the financing is settled, the company can focus all its attention, without distraction, on the due diligence, on looking for synergies and on preparing the acquisition's integration plan.
*As at May 3, 2021