CASE
The value of M&A check-up exams
Nosso Cliente
Company of diagnostic laboratory sector.
Desafio
Our customers were the founders of this small network of diagnostic laboratories, exploring a very specific market niche, outside the radar of large companies in the sector. Low competition, double-digit growth every year, high profitability, low capital requirements, fat dividends; in short, round business.
Until the day when one of the giants in the sector began to study the company. Less than a month later, an informal conversation became a formal acquisition proposal. Important detail: the proposal came with very low values. But you must be thinking that this is not a problem. Or if it’s a problem, it’s a problem for the good.
However, for our customers, this proposal posed a difficult dilemma: selling the business poorly at a time of full growth or continuing to grow alone and expect a greater appreciation of the company to sell better, assuming the risk of facing predatory competition from large and be swallowed. The market moment was of great consolidation in the sector, that is, an intense movement of buying small laboratories by large laboratories. In a short time, this would no longer be a game for anyone, not even the niche markets were protected from this consolidation movement.
In addition, the company had few partners, an informal management (none of them were administrators) and a relatively short life span. Therefore, still in the view of our customers, the company would not be able to present itself, in a sales process, and even if it passed the negotiation phase, it would not be able to survive a legal and financial audit.
We were then triggered with this pile of “problems” to solve.
Nossa Solução
Our first questions at the first meeting when the dilemma was presented to us: why do we have to sell badly? Can’t we sell well?
Then we put on the “white coat”. We ask for a list of exams and recommend
12-hour fast (that is, we momentarily suspend conversations with the buyer). It was time to make the patient’s complete diagnosis before prescribing the medicine.
We reviewed all the company’s balance sheets and financial statements, made adjustments to some accounts, identified inaccuracies and errors, suggested improvements.
We also map the main contracts, labor, tax, regulatory and other legal matters important to the operation.
With more reliable accounting, legal and tax information, in addition to identifying our strengths and weaknesses, it was time to understand the real value of the business. We reviewed the business growth prospects, based on our experience in the sector and the performance of similar companies.
At the customer’s request, we take the front line in negotiating with the buyer. We conducted the audit work, we did all contract negotiations. Customers were only involved in relevant and strategic discussions. And there were many.
In the end, customer engagement was fundamental to the success of the operation. We sold the company for twice the amount offered in that first proposal. The buyer was also very satisfied, as he ended up getting to know and buying a ‘new’ company after the whole process.