Comments, 23.04.2010

Miroslav A. Tabaharnyuk,
Vice President of Industrialists and Entrepreneurs Union, Chairman of the Supervisory Board of the Company "MT-Invest, candidate of economic science.

 

Miroslav A, as a specialist in mergers and acquisitions market, what can you advise to owners of assets that have wish or necessity to sell their business?

 

There is not only answer how to sell assets at the fastest and most profitable way. Because each business is unique phenomenon and its successful development and operations depend on many factors. So the goal of my company as M&A operator is to systematize and analyze the factors that affect business valuation and influence on the selling price of the company.
Any owner when creating a business, establishing the business processes already at an early stage must think about when, how and at what price he should go out of business. Compared with the before-crisis period today pricing approach to selling assets has undergone some changes. And if the earlier investors/buyers were willing to pay only for potential business, today this potential should be confirmed by the actual financial performance and positive cash flow.

So today investors wish to invest only in profitable and developed companies?

In most cases – yes, it is so. In addition financial audit and evaluation of the company, any investor also takes into account many factors from the country’s macroeconomic indicators, as such, to the organization of work and qualifications of the team. Of course investors are looking for stable investment field, where their money will be properly protected. But, for example, stable European Investment field requires is a very precise rules but thus provides very average income. Ukraine in comparison with Europe is still a country where investment may bring enormous profits. Of course, there is a certain degree of risk but, as the last time - investors are beginning to return to the market of Ukraine. The crisis has forced many Ukrainian asset owners understand that today’s market is a buyer’s market. That pushed a lot of owners to review their attitude to the formation of prices and to the sale of business. Many foreign investors are perfectly aware that it is the best time to buy assets on minimum crisis prices. This is a best time for buying! Taking decision on whether to buy assets, any investor will usually prefer profitable company. But if the company has substantial share in its market, adequate management structure, sufficient staff, balanced marketing strategy - all these factors can complement the company’s financial performance and increase its price. Today, thanks to the crisis in banking and difficult access to credit - many companies simply do not have sufficient working capital. Therefore their profitability is falling. New investor, bought the duly constituted and organized business, will bring it to a profitable level in a very short time.

What issues are most important for investor when selecting an object for acquisition or merger?

Besides financial performance main focuses on the analysis of the legal form of company ownership structure and definition of property sales. As a seller and buyer must clearly understand “what and where” they will sell or buy, and what rights and obligations makes buying shares in the capital of LLC or stake in JSC. Organizational legal form of the company should be correspondent to the existing law, must be transparent and clear ownership structure and the interaction between the owners themselves. Also emphasis is made on the company’s strategy. Unfortunately strategic planning is not among the priorities of top management of Ukrainian companies. The emphasis in most cases is to solve tactical problems. In my opinion, lack of strategy - is scheduled to defeat any business and one of the major factors affecting the potential price of the company. Marketing strategy, well created advertising policy, clearly placing the goals and priorities - these are the cornerstones of any successful business. Those factors create its rating. Also important to any potential investor is company personnel, the training team.
Another point that gives weight to any business, you should determine whether the annual audit of the company by international standards of financial reporting. Special place this factor has for foreign investors and the well-known stamp of “Big Four” auditor’s company will only persuade investors in favor the acquisition of such company.

And how you, as transactions operator can affect the decision of buying or agreement on the price, if any impact at all there is?

It is quite an interesting question. The operator is not only choosing the object to a merger or acquisition, but also accompanied a transaction to its completion – till the transfer of ownership rights. Typically the company “MT-Invest” represents one of the parties in the transaction, and certainly trying to influence the negotiation process so as to achieve the most favorable terms for our client. We develop an argument that, depending on whose interests are present in, may contribute to price adjustment, or provide more motivation for asset sales by the seller and the desire to gain purchase on the buyer. The operator monitors the transaction, directs and coordinates the work of a great team - auditors, lawyers, consultants, etc. And most importantly - operator ensures that the most advantageous terms for his client during the negotiation process and price formation.