Myroslav Alexandrovich, please, tell me what is the main sphere of activity of the company “MT-Invest”, and what you consider being the main benefits of your company?
“MT-Invest” - is the operator of the Mergers&Acquisitions market (M&A). The essence of activity of such operator is to contribute to the transaction - whether buying or selling a business attract different kinds of investments, etc. Today, when access to financial resources is difficult enough, holding the transaction to sell some assets for many companies is a very successful exit from the crisis. In addition, there is not always necessary to sale business entirely. “MT-Invest” also serves as an investment broker who can help to find a strategic investor, financial partner.
And why the company can not independently sell their own assets or shares, why recourse to intermediaries?
I would not call the company “MT-Invest” mediator. Yes, of course, the meaning of any transaction - is its success, that is, successfully negotiate between the seller and buyer and facilitate their understanding. But this is a very narrow understanding. Sale or purchase of any business - it is a very expensive operation in terms of time and resources. While there are always many “pitfalls”, the awareness and analysis to be carried out quickly but very carefully, objectively and thoroughly. Omission of one, at first glance, the small, aspect of the transaction may seriously affect the profitability or even loss of profits. That is why companies need such a consultant. After all every even very famous and expensive brand are people, the team, not only figures and analytical reports. The essence of the “MT-Invest” - to help these two teams of seller and buyer to find a common language among them, to achieve understanding and begin to speak “common language”. The causes of misunderstanding can be many, the difference in mentality in their approach to business, even in the emotional manifestations during the negotiations. An operator in this case serves as an independent party, the experts, who owns all the “rules of the game”, has experience of similar transactions and control the process without unnecessary emotion. Consultant meticulously goes through all stages of the transaction, with both sides - the seller and the buyer than afford to reduce level the risks in the transaction.
Tell me is there strong demand for such services and whether many companies working in this field?
Certainly, the demand for such services is present even in the current crisis period. There are a number of companies interested in acquiring existing businesses in Ukraine or in the possibility of finding a strategic partner for the development of this business. The selection criteria for purchase, if very simplify the process, are following basic parameters - the company must generate cash flow, the products must be competitive, focusing on the effectiveness of marketing strategy of company development, the level of professionalism of the team. Our task, as financial advisor to help correctly evaluate such assets, to prepare the company for sale, to help both the seller and the buyer to decide what is currently the most profitable and priorities - a partnership or a complete change of ownership.
About the number of operators in the market M&A – there are many companies that can provide such service but most of them - are financial institutions, investment banks. For these institutions market M&A is only one the component of their activities, they are very multidisciplinary. The distinguishing feature of the “MT-Invest” - it only specialize in a specific area, we are the operator of the market of mergers and acquisitions. Perhaps many will ask themselves why our sphere interest is so narrow, when you can do everything at once - real estate, investment, consulting, etc. Yes, perhaps we could. But I always stand on the position of professionalism and understanding of my responsibilities. Being a professional immediately and in all areas - it is not possible and the crisis has revealed that dramatic confirmation. You may see companies, which seemed to be so diversified their activities that simply could not stay without profit, but got nothing. For the investment bank's M & A transactions is a side process, it requires a lot of effort and time that are not always guaranteed a transaction. These institutions make money from providing other services and pay maximum attention to each transaction they are simply not physically able. For “MT-Invest” this is a priority, this is our sphere of activity, this is what we can do. And we make it professionally, promptly and on a much more cheaper then investment bank.
What then, is the main criterion for the professional operator of M&A?
Knowing of the market in which you play. Again, any transaction - is the ability to “throw together” the seller and the buyer. It is the ability to control and direct the negotiation process, taking into account not only financial and economic factors but - the first and most important - a human factor. This requires knowledge in many industries and fields, from psychology to economics, because you need to know how to evaluate a reinforced concrete factory and a chicken farm or property, for example. This is a huge amount of contacts and personal relations knowledge of all market players, all the subjects and objects. As soon as the company has received a mandate to buy or sell immediately must be formed to whom it may be interesting and who is your potential customer, where to transmit information. “MT-Invest” has a very extensive database.
If the deal does not happened? Consultant receives payment for work performed?
This is stipulated in each case. Typically, the fee of our company is a certain % of the amount of the transaction and is paid only if a completed transaction. However, there are a number of companies who use our consulting services constantly. By the way about 80% of transactions are not happening for the very reason that the buyer and the seller could not agree on price. The buyer was unable to find the right arguments to justify their requests, and the seller was unable to confirm the objectivity their claims. Although it was several phases of pre-negotiation, auditing, both sides really wanted to hold a transaction, but .... That is the human factor.
And what is the motive under which a businessman decides to sell or buy a new business?
The motives are different. Each of the buyers of business may have different personal reason - someone has “free” financial resources that he would like to invest, and he chooses an attractive object or branch. Someone is already present in a particular business, but it needs to expand the geography, to increase the capitalization.
With regard to the sale of business, here the reasons may be very different. The main objective of any sale - this is, of course, income. But the purpose of its use may be different. Somebody’s circumstances may be such that at that moment he needs “real money”, someone wants to sell the business in a particular area in order to invest in another, someone was physically tired and does not want to be “hostage” of own business. For any private business, even a very profitable and popular, requires ongoing investment and effort. In addition, there are objective processes of globalization, which are sometimes forced to carry out the process of merging companies.
Does it make sense to sell a successful business that is profitable, and which has been invested so much emotion?
There is sense. Once again, accentuate your attention to the fact that the sale of a business or part of its assets is a very lucrative deal for the seller. Let me explain - the person is the owner of the company which has been operating for several years, showing a steady positive cash flow of funds and generating income, for example, of 100 000 dollars. That is, for 10 years, this man can make a million. But it can also make this a million today, selling your business! He will get the same profit that he is able to invest in some other, more ambitious and expensive industry. For someone who wants to grow, to be constantly in the dynamics - the market M&A is a constant scope of his interests.
What, in your opinion, the main mistakes allowed the company when searching for financial partners, or when trying to sell your business?
From my experience, the most difficult is not even a mandate for the sale of any investment-attractive object or find a buyer, and to reach understanding on the formation of its value. The most important question when buying or selling a business - is pricing.
In recent months, the Ukrainian M&A market have appeared a huge number of applications of forced sales of the assets. Error is always the same - revaluation of assets, too overvalued by the seller. Today’s market is a market of a buyer. Many players are willing to sell the assets continue to think the criteria in 2007 - huge hollow loans, billion-dollar, neglect to commercial proposals below a certain strips, etc. This is the main strategic error. Many of the proposals received for the sale are absolutely unreasonable and inflated prices without regard to political, economic and other risks. But today’s buyer is a professional player - or an investment fund or a bank or a large holding company, which operates a huge team of analysts, appraisers, consultants. Buyer logically evaluates all the risks and carries a price correction, which is very often absolutely different from the first seller’s price. Because the main interest of the buyer is even not the amount of money he had to pay but payback period of the acquired business. It the case revaluated assets this indicator extends over many years. The challenge of today's seller of any assets is to understand clearly that the price should be as well founded, that all your wishes should be supported by specific calculations and figures. To present these calculations and the figures properly, properly “to submit” a proposal, not to revaluate assets and not to sell too cheap - this is those reason why it is necessary to attract M&A operator.
Which areas are most attractive for investment to date? After all, before crisis the main field for investment was the real estate?
Not quite. Market M&A is not just market speculation, like many years was Ukrainian development market. It is an integration of business, expanding companies, “absorption” of competitors, etc. The main areas of activity, starting in 2006 and 2008 were finance, metallurgy and food industry. Then came the mining, construction and real estate, Mass Media and other industries. Today we may hardly wait mega-deals as in 2007, but, in my opinion, should anticipate an increase in M&A activity in the middle segment. Paradoxically in a crisis, but this segment will be most active. Transactions in it much cheaper, more balanced company than major corporations approached its borrowing policy, more soberly evaluate their business and its capabilities.
Do you think that in the near future market M&A will be subject to any changes for the better?
Certainly. Any crisis - this is a temporary phenomenon. Business, fashion, history - all cyclical, everything develops in a spiral. After the fall begins the ascent, it is the law. Today, the crisis was the cause of the slowdown in the category of mega-deals that are one or two transactions closed the market volume for the entire year. Also, speaking of the causes of some inertia of sellers must be mentioned that in Ukraine, in contrast to global trends, most of the negotiating processes on the sale/purchase of assets start without the help of an operator M&A. And 80% of transactions do not reach the signing of the contract. This is official statistics. And this fact confirms that representatives of business community must revise its approach to this process.
Once again I want to emphasize that the main objective of our company not just to negotiate, and to minimize the risk for any of the parties and bring the transaction to completion. We can not afford a policy of Louis “After us the deluge”, just a deal and cash in on it - it features an average mediator. Operator M&A is not just preparing a transaction, it helps you navigate the new market, understand the rules of doing business in a new country (and in terms of any alien - Ukraine is a country with not good and not understandable conditions for investment), or to help restructure you buy assets and enterprises to draw your attention to the basic advantages and disadvantages. Our task is not simply to help you buy a new business, our task is to help you make this business successful, to re-use our services!