You want to acquire a failing company: the steps involved in successful turnaround.

The successful post-acquisition turnaround of a failing company requires answering a certain number of questions prior to, during and after the acquisition.

1 – Prior to the acquisition:

  • What economic, employment and financial data are available in respect of the company and are they complete? Support for the due diligence performed is primordial.
  • What has been the origin of the company’s difficulties? All the drivers for turnaround must be identified.

2 – During the acquisition:

  • What is the legal framework for the acquisition? The risks and benefits associated with each framework must be measured both for the target and for the acquirer.
  • What are the key drivers for developing a business plan for the new structure?

All the impacts (operating and financial, and in terms of employment and working capital) of the change of shareholders must be determined. Assessing the financing requirement for the acquisition and subsequent restructuring then becomes a key element:

  • What will be the initial cost of acquisition? It is important to know on what basis the value was calculated and whether the negotiated terms and conditions are favourable or not. In the event of negative consideration for the acquisition, it must be determined whether the price agreed will be sufficient to cover the acquired structure’s future cash requirement.

3 – After the acquisition:

  • What is the content of the work-back schedule developed for implementation of the requisite restructuring and drivers for performance improvement?
  • What management tools will be required to pilot the new structure and monitor cash in detail?
  • What exit value can I hope for at the time of resale of my shares?

A certain number of responses are available for the questions thus arising in respect of the target company’s redeployment:

For successful turnaround, it is vital to assess the financing requirement precisely and prior to acquisition.

If you intend to acquire a company in difficulty, SO-MG Partners can support you at all stages of the acquisition to ensure a successful outcome in both operating and financial terms.

Our analysis will be designed to:

1 – Estimate as precisely as possible the target company’s value both at the time of acquisition and in the hypothesis of a future sale.

2 – Determine in two steps the company’s future cash requirements and how to finance them:

  • By performing tailored financial due diligence whenever obtaining rapid results subject to strict timing constraints is key to success: analysis will be made of the key profit or loss and cash flow contributors, of critical issues and of any deal-breakers;
  • By securing the acquisition via the preparation of operating and cash flow forecasts using a comprehensive methodology involving modelling of the acquisition balance sheet and of the prospective working capital requirement: this approach will notably disclose the equity structure required on takeover and the appropriate level of debt for the new entity.

Overview of our support:

  • Tailored due diligence providing security for the acquirer; or
  • Preparation of the sale providing security for the seller;
  • Identification of the post-deal financing requirement, covering a sufficiently long period;
  • Support for management of the target company in implementing its integration plan.