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Introduction
The market for corporate acquisitions (Mergers & Acquisitions, or“M&A”for short) is highly specialized, and various individual disciplines—such as taxation, law, business valuation, and M&A consulting—are typically involved in the process. As a result, expert knowledge is essential and, at certain stages of the process, even indispensable.
In particular, increasing digitalization and the platform economy are raising new questions—and offering innovative opportunities—for advising on succession planning and, more generally, for corporate transactions.
Current Situation: Succession Gap in the SME Sector
More than 200,000 small and medium-sized enterprises will face the issue of business succession over the next five years. In many cases, it remains unclear what form the succession should take and how it should be implemented.
Unless business succession is arranged within the family, the available options include bringing an investor on board as a minority or new majority shareholder, or selling the company outright. This presents the business owner with the task of finding the right prospective buyer—either on their own or with the help of a suitable advisor specializing in mergers and acquisitions (M&A).
Digitalization of the M&A Market
Digitalization has been gradually making its way into corporate transactions for several years now. Whereas company information used to be made available by the seller in a physical data room, today the exchange of information takes place almost entirely via virtual data rooms, which are usually organized by specialized data room providers.
Furthermore, especially over the past three years due to COVID-19, we have learned how to replace in-person meetings with virtual meetings via Skype, Zoom, or Microsoft Teams, thereby achieving enormous efficiency gains—for example, through savings on travel costs and time; although the downside is the lack of social contact and spontaneous interaction.
In addition, a platform economy has developed and become established in recent years—driven primarily by e-commerce—and is also gaining relevance for the M&A market. The term “platform economy” refers to the changes in processes driven by digitalization. This also includes further digitizing the M&A process and, in particular, bringing market participants together via a digital platform. The goal is to make the search for a suitable buyer simple, confidential, and efficient; naturally, the same conditions apply to potential buyers and investors as well.
Changing Expectations of Sellers and Buyers Regarding M&A Advisors and the M&A Process
To date, the corporate transactions market can be described as highly fragmented and is characterized by significant information asymmetry. In the SME sector in particular, a large number of potential sale targets are matched by an equally large number of prospective buyers. In most cases, it can be considered a matter of chance for sellers and buyers to find each other without the help of an advisor. Once a match is made, the transaction process must be organized professionally.
The success of a business sale therefore depends to a significant extent on the commitment and quality of an M&A advisor. The M&A advisor manages the sales process and, in particular, reaches out to potential buyers within their network. This is often like looking for a needle in a haystack, since business succession in the SME sector is frequently not just about achieving the optimal purchase price, but also—not infrequently—about continuing and further developing a lifetime’s work.
On the other hand, there are prospective buyers who either wish to select from a broad spectrum of interesting target companies or are specifically looking for companies that match their investment profile.
In addition, we are observing an increasing pace of processes in corporate transactions. Often, only a few weeks are available to complete the transaction, during which the selection of prospective buyers, the conduct of due diligence (including financial, tax, legal, and commercial due diligence), and the negotiations on the purchase agreement must take place.
Despite these changing demands on the transaction process, one thing remains constant: the sale of one’s life’s work is a life-changing event, particularly for the business owner—and, not infrequently, the founder. It is of particular importance—not only for the entrepreneur but also for the company, its employees, and its business relationships—that the M&A process be conducted discreetly. Trust in the parties involved and the confidentiality of information are therefore fundamental requirements for the transaction process and its participants.
DUB-Premium
DUB-Premium is the name of the new digital transaction platform, a specialized offshoot of the well-known and established DUB.de Deutsche Unternehmensbörse, aimed at companies with annual revenue of approximately 20 million euros or more.
It addresses the changing needs of sellers and buyers and combines extensive national and international reach with 24/7 mobile accessibility (“M&A to-go”) with efficiency and the essential confidentiality required in a structured matching process.
DUB-Premium supports business sellers and prospective buyers from the initial listing through to establishing contact, establishing valuable connections with experienced M&A advisors at various stages of the transaction process.
Deloitte’s Digital Commitment
Deloitte, as the world’s largest consulting firm, supports DUB-Premium as a strategic partner with know-how and transaction expertise drawn from a wide range of national and international corporate transactions in the SME sector.
As one of the Big Four accounting firms in Germany, Deloitte, with its team of specialists, advises many mid-market companies on all aspects of corporate transactions and also possesses outstanding expertise in dealing with financial investors and family offices. The scope of its advisory services ranges from traditional financial or tax due diligence and carve-out support to business valuation and post-merger integration.
In addition, Deloitte, in collaboration with colleagues from its law firm, provides legal advice, including the drafting of confidentiality agreements, letters of intent (known as “LOI” or “MOU”) to the drafting of purchase agreements (known as “SPA”). Deloitte is a global leader in consulting, analysis, and the digital transformation of business processes; as such, it is both an incentive and an obligation to address the succession and M&A processes with the best digital solutions.
Conclusion
In a fragmented market such as that of SME transactions, digital solutions like DUB-Premium help to quickly and efficiently bridge existing information asymmetries.
Through Deloitte’s strategic partnership with DUB-Premium, the traditional consulting approach—including expert knowledge—is optimally combined with the advantages of a digital transaction platform for the benefit of clients and users.
