Processes
1. BUSINESS MODEL ANALYSIS
This phase is really all about looking at the project, related financial planning and equity story in detail, getting up to speed, do some benchmarking and potentially already recommend adaptations. At an early company stage is is still possible to re-shape business models as such, but even further down the line it is useful for the entrepreneur to understand which revenue streams are considered as value drivers – and which maybe not. To me those cases are particularly interesting, where a broader business model appears to stand in contrast with the investor-ideal of “scalability”. To then find out, thinking about times of crisis, that several legs greatly contributed to stabilize the entire structure. Which then obviously leads to various trade offs.
2. DRAFTING DOCUMENTATION
Drafting documentation is as much a creative as an administrative process, in a venture scenario generating the most convincing pitch deck, at a later stage making sure that the vision is backed up with the necessary numbers. Thankfully, nobody has been asking for outright business plans for about 10 years now. Then again, the necessity of presenting the company and case in a convincing and comprehensive manner remained the same. So now the challenge has moved to finding the right balance between abstract, to the point visualization while also conveying, in various steps and formats, a great number of details needed to make a business decision.
3. APPROACHING INVESTORS
Years of experience in the corporate finance sector lead to a network of contacts to Business Angels, Venture Capital/ Private Equity Investors, Family Offices and strategic partners. This network breathes, which also means that each mandate entails a related research project and new contacts that need to be approached in a convincing manner. Even if it is of course an advantage to know investors, that alone will not help at all. An investment decision hardly ever comes down to one person, in one way or another, committees almost always have the last word. At their core transactions are therefor driven by the solidity and potential of a case (plus, see above, a transparent and through illustration). What is of course essential is the strategic fit between buyer/ investor and the “target”. In that regard the question, wether and how well one “knows” an investor is of course extremely meaningful.
4. ASSISTING MEETINGS
Some developers like to speak tech. Entrepreneurs are often visionaries. Investors have an appreciation for facts. Bringing these worlds together, online and at the round table, is of course part of the job description. The extent to which the advisor is involved in this part of the process varies. In the case of startups the mental freshness, drive and authenticity of the team maybe the most important investment criteria. The sooner a direct, intense link between the team and the investor can be established, the better for the overall process. Somewhat in contrast shareholders of later stage companies actually like to leverage the advisor as front man and let him handle a good part of the communication “burden”, just like buyers/ investors tend to much appreciate a competent advisor who helps them to quickly grasp and discuss a case thoroughly.
5. SUPPORTING THE DUE DILIGENCE
Depending on the complexity of the company and time since foundation the Due Diligence may belong to the most complex phases of a transaction, often involving further advisors. Keeping a cool head and identifying potential deal breakers as early as possible in the process is therefor essential. The importance of staying critical and “sober” can not be stressed enough. Any advisor who has been in this business for some time saw deals fall apart, even after a very, very significant amount of time has been invested, sometimes by all parties involved. Obviously a worst case scenario to be avoided at all costs. Hence don’t be surprised if the M&A advisor, over your first coffee together, asks you questions that you would have rather expected from the lawyer of the potential buyer months later in a dusty due diligence room. This is really in your own best interest too.
6. SIGNING & CLOSING
Advising on the process “end to end” implies that negotiations are supported down to the details and the last minute contributing to carry the deal across the finishing line. This entails watching over this last mile of the process from Term Sheet, over aforementioned DD, Investment-/ Sales and Purchase Agreement on to the notarial act and entry into the company registry. As a matter of course the M&A advisor is not entitled (strictly speaking: not allowed) to impart legal advise. At the same time any transaction is a journey, one wants to make sure that the company/ shareholders advised stay in control and that the best possible result is achieved. That again is by far not only a question of company valuation and other clauses in the contract.
