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Acquisition Process
Step 1: Introductions
Direct Contact
Business owners often contact us directly to determine if we are interested in
acquiring their company or partnering with them to invest in and help grow their
business. To see if PREMO VENTURES might be a good fit for you, please see
our Acquisition Criteria section.
Intermediary
In other cases, intermediaries, including business brokers, investment bankers,
commercial bankers, accountants, etc. introduce business owners to PREMO
VENTURES. Frequently, the intermediary has been engaged by the business
owner. Intermediaries can help owners reach a larger pool of buyers, guide
owners through the sale process and assist owners in identifying qualified
transaction advisors (such as attorneys).
PREMO VENTURES has acquired companies where intermediaries were involved
and those where they were not. Choosing an intermediaryor notis a
personal decision. We have established lasting relationships with intermediaries
in our region and would be happy to make introductions to them.
Of the 100 or so companies we are introduced to each year, approximately 25%
proceed to Step 2.
Other information that is particularly relevant based on the type of business (for
example, annual capital expenditures in a capital-intensive business)
Steps in a Merger
There are three major steps in a merger transaction: planning, resolution, implementation.
1. Planning, which is the most complex part of the merger process, entails the analysis, the action
plan, and the negotiations between the parties involved. The planning stage may last any length of
time, but once it is complete, the merger process is well on the way.
More in detail, the planning stage also includes:
the appointing of advisors who play the role of consultants, examining the strengths,
weaknesses, opportunities, and threats of the merger;
detailing the timetable (deadline), conditions (share exchange ratio), and type of
transaction (merger by integration or through the formation of a new company);
expert report on the consistency of the share exchange ratio, for all of the companies involved.
2. The resolution is simply management's approval first, then by the shareholders involved in the
merger plan.
The resolution stage also includes:
the Board of Directors calling an extraordinary shareholders meeting whose item on the
agenda is the merger proposal;
the extraordinary shareholders meeting being called to pass a resolution on the item on the
agenda;
any opposition to the merger by creditors and bondholders within 60 days of the resolution;
green light from the Italian Antitrust Authority, that evaluates the impact of the merger and
imposes any obligations as a prerequisite for approving the merger.
3. Implementation is the final stage of the merger process, including enrolment of the merger deed in
the Company Register.
Normally medium-sized/big mergers require one year from the start-up of negotiations to the closing
of the transaction. This is because, in addition to the time needed technically, there are problems
relating to the share exchange ratio between the merging companies which is rarely accepted by the
parties without drawn-out negotiations.
During the merger process, share prices will adjust to the share exchange ratio. On the effective date
of the merger, financial intermediaries will enter the new shares with the new quantities in the
dossiers. The shareholders may trade without constraint the new shares and benefit from all rights
(dividends, voting rights).
For example, an oil and natural gas company might form a strategic alliance with a
research laboratory to develop more commercially viable recovery processes. A
clothing retailer might form a strategic alliance with a single clothing
manufacturer to ensure consistent quality and sizing. A major website could form
a strategic alliance with an analytics company to improve its marketing efforts.
Thus, alliances are formed for joint marketing, joint sales or distribution,
joint production, design collaboration, technology licensing and research
and development.
Although JVs represent a great way to pool capital and expertise and reduce the
exposure of risk to all involved, they do present some unique challenges as well. For
instance, if party A comes up with an idea that allows the JV to flourish, what cut of the
profits does party A get? Does the party simply receive a cut based on the original
investment pool or is there recognition of the party's contribution above and beyond the
initial stake? For this and other reasons, it is estimated that nearly half of all JVs last less
than four years and end in animosity.
Joint ventures can be flexible. For example, a joint venture can have a
limited life span and only cover part of what you do, thus limiting both your
commitment and the business' exposure.
In the era of divestiture and consolidation, JVs offer a creative way for
companies to exit from non-core businesses.
The objectives of the venture are not 100 per cent clear and
communicated to everyone involved.
The partners don't provide enough leadership and support in the early
stages.