This is exactly what happened about five years ago when Midea acquired the Augsburg-based industrial robot manufacturer Kuka: While there were immediately obvious potential buyers—such as Siemens, ABB from Switzerland, or Yaskawa from Japan, as well as a handful of other manufacturers of assembly and welding robots— Furthermore, the sentiment in political circles and within the German business community was clearly opposed to the offer, and plans were drawn up for a takeover consortium to find a European buyer for the manufacturer, which was a leader in many technical areas.
In the end, however, none of these efforts succeeded. Despite major concerns (particularly regarding technology transfer and information security), no strategic investor could be found who was willing to throw their hat into the ring. The acquisition ultimately took place on the terms offered by the buyer.
The situation was quite different with the supposedly boring topic of pet food. Zooplus AG, which has since been reorganized as an SE, managed to attract the attention of two private equity firms last year with its equity story, sparking a full-blown bidding war that drove the startup’s valuation to an impressive 3.7 billion EUR. The battle for the company, which didn’t end until May 2022, ultimately resulted in a valuation with an EBITDA multiple of nearly 50!
The underlying trends are easy to identify: Due to the pandemic and remote work, getting a pet became more appealing to many people, and the same factors led to increased online shopping in the pet sector. At the same time, dogs today are no longer named Bello and Rex but are given children’s names, suggesting that the emotional bond has grown stronger—the dog as a full-fledged family member. The associated spending behavior is reflected in an attractive company valuation.
What does a comparison of the two company histories reveal?
From the perspective of M&A practitioners and valuation experts, it’s clear that when selling a company, the business model is just as important as compelling products. In other words: seemingly less attractive sectors can often command very attractive valuations when backed by a strong equity story. It all comes down to effectively presenting the company’s opportunities and clearly articulating the case for investment.
Presenting the potential of the company in question is just as important as knowing the right contacts and points of contact among prospective buyers, which then lead, in a second step, to a bidding process. Such a process cannot be forced if the company does not fit into the plans of competitors and strategic investors during the targeted sale period. However, buyers’ expectations and restrictions are often somewhat vague, and an in-depth discussion can then lead to identifying companies that the prospective buyer would not have noticed on their own.
Ultimately, the goal is always to identify the right candidates in the client’s best interest and to improve the “matching” process—that is, to preselect more suitable prospective buyers for the right sales mandates and to narrow them down through dialogue.
This is precisely where M&A advisors like Calandicome in. Many prospective buyers have been in discussions with us for quite some time and refine their expectations and criteria as the search progresses. Based on this, we identify several prospective buyers and align them with the seller’s expectations. From the seller’s perspective, the question often arises as to whether the entrepreneur would prefer to accept the second-best price in order to ultimately implement a corporate solution that aligns with their own vision.
From a human and business-psychological perspective, it’s understandable that very few entrepreneurs want to sell their life’s work to a direct competitor. Factors such as a minority stake for the children in the company being sold also frequently play a role in the matching process. At the same time, for owner-managed companies with revenue in the low double-digit millions, the company’s location is also an important criterion —even an online store cannot always be easily relocated if key employees are tied to a specific location, and not every prospective buyer is willing to move to the other end of the country or commute long distances to take over an attractive company as a managing partner.
This process worked like a charm in the case of an online retailer with revenue in the mid-7-digit range, where Calandi’s consultants, together with the company owner, were able to paint a compelling, detailed picture of the company based on its history and the milestones it had achieved. The coherent presentation of the company and the identification of growth opportunities gave prospective buyers a sense of the company’s strategy and, consequently, an idea of the strengths upon which the company’s future success would be built.
This analysis was supported by the selling entrepreneur’s commitment to actively help shape the transition during the training and handover period. Sébastien Graf von Westphalen, a former partner at the law firm White & Case LLP, stepped in as the buyer through the investment firm Harwest 2.0: “During the due diligence process, I received active support from Calandi and was provided with professional guidance throughout, enabling the deal to be successfully closed within a manageable timeframe of seven months.”
The transaction was accelerated by the use of the Calandi Matching database and the staff’s in-depth client knowledge, which ultimately led to the identification of a well-suited candidate and negotiations that resulted in an outcome highly satisfactory to both parties.
