Making complex processes clear and controllable
It is above all the complexity of transaction processes that means a big challenge for companies. In order to successfully conclude corporate transactions such as carve-outs, an exact knowledge of the processes is just as necessary as comprehensive detailed knowledge of the different sub-aspects – economic, tax-related, financial and legal. Our transaction experts support you during the entire transaction process, work out individual solutions and point out risks.
We assist you with following transaction processes:
Business development through mergers and acquisitions
There are many reasons for the purchase of a complete company, of parts of a company or for the merger of two companies. We advise you and support you during the clarification of the question as to whether the company to be purchased or the merger corresponds to your own expectations regarding opportunities and risks and what purchase price is appropriate.
Discontinuance of operations or areas that are not part of the core business or yield only few returns
Triggers for the sale of companies or business segments can, for example, be the changes in the markets, technological progress, make or buy decisions, globalisation or even business sector consolidations. Another possible reason is that the management’s return on investment targets are not being met in certain areas of a corporation where core activities are not involved. We analyse the situation jointly with you and work out the correct steps for you.
In family-owned partner-managed companies the question of succession arises upon the change of generation. As fundamental possibilities, succession within the family, selling to the management (MBO/MBI), strategic investors, financial investors or even going public suggest themselves. As a client of PKF you can count on our support with answers to these questions.
Our services in transaction consulting:
Financial Due Diligence
For the acquisition of a company the financial due diligence is an essential tool for the more precise observation of the target company. With analyses of the earnings and risk profile of the target company, it can yield a comprehensive picture of the financial strengths and weaknesses. Our finance experts in any case work out for you decision and objective-orientated and hence meaningful and informative analyses.
For example, we can help you answer the following questions:
- In what business segments is money earned?
- Upon which customers is one dependent on the earnings side?
- How variable is the cost structure?
- What effect does the loss of a key account have on the income and cost structure?
The financial due diligence yields findings on whether the earnings expectations on which the purchase price offer is based, are accurate and sustainable. Besides other building blocks, it is used for the processing and preparation for the management of information of relevance to decision-making and hence increases the quality of the decision concerning the investment.
The structuring of corporate transactions is characterised by increasing complexity. For example, for the optimum structuring of corporate acquisitions, mergers or joint ventures, numerous company law and liability law aspects are to be observed. Above and beyond that, special demands are made on structuring if the parties to the transaction are not based in the same country or a group of companies is involved which maintains independent legal units in various countries.
Often tax law aspects are at the forefront as regards the design of the target structure. Our tax experts can at the same time assist you in making systematic use of tax reductions and exemptions.
One tool for this is what is referred to as the tax structure memo by means of which you can deduce a recommendation for the tax-related target structure.
The tax structure memo analyses, among other things:
- the deductibility of incidental transaction costs and financing expenses
- the depreciation possibilities
- the real estate transfer tax aspects
- compliance with the provisions on external financing of shareholders
- the effects of the interest barrier
- the preservation of loss carryovers
- the special features of the problem area of restructuring profit
Vendor Due Diligence
The vendor due diligence provides sellers in auction processes, in which several bidders are to be granted the possibility of due diligence, with some advantages. It serves to furnish the potential purchaser with information from the seller relevant to the decision-making.
With the support offered by us you will be able to recognise problem areas as early as the preparatory phase. You will be able as the seller to better control the flow of information and the supply of data of the same kind to all of the bidders is ensured. A further advantage is less burdening of internal resources.
Better control in financing processes
Particularly in uncertain times, financing banks demand a high level of transparency from the borrower for growth financing, financing of acquisitions or in the case of refinancing. We support our clients with the establishing of the required transparency. And hence in complying with the banks' interest in obtaining, through an expert third party, a better general idea of the opportunities and risks of their loan exposure. Moreover, in that way the borrower is provided with the opportunity to control the financing projects striven for, in a foresighted manner and on its own initiative, by commissioning a due diligence of its own company.
Tax Due Diligence
An essential aspect of the decision to acquire a company is the assessment of tax risks, with the complexity being markedly increased if the target company has its headquarters abroad.
In the tax due diligence performed for you by our experts, tax risks are identified and quantified. The transparency thus gained creates certainty and opens up room for manoeuvre for the potential purchaser.
Critical topics such as fiscal units, profit and loss transfer agreements, transfer prices, shareholder loans, taxing of transaction profits or hidden distributions of profits demand special attention at the time of the purchase of a company. Here, too, you can rely on our experience and our know-how.
On the basis of the results worked out, the transaction experts from PKF show you the corresponding recommendations for action. The risks of payments of tax arrears, for example, should be included by the purchaser in the negotiations as an item to be deducted or absorbed by appropriate guarantee provisions in the contract of purchase and sale.
Moreover, the tax due diligence provides important findings concerning the organisation of compliance with tax regulations (tax compliance).
Financial Fact Book
An integral part of the process of selling is to comprehensively prepare and present relevant information on the company for potential buyers. This is usually done by means of the information memorandum of the M&A consultant engaged.
For objectivisation and in the case of a high complexity of the figures it is advisable in individual cases to present the facts and figures on the company in what is known as a Financial Fact Book. With this it is, in addition, possible to control the presentation of the financial data and to control the analyses derived from them in a foresighted manner and on one's own initiative.
The transaction experts from PKF support you with the Financial Fact Book also in the case of a carve-out, when, that is, parts of a company or a group of companies are sold which previously did not act as legally independent units. Here independent pro-forma income statements as well as balance sheets are to be determined.
If a company has changed greatly in the more recent past, for example by the sale of a major business area, it mostly cannot be compared with the previous years from an economic point of view. Here a further instrument known as like for like, as an important key figure, ensures more transparency and makes it possible, especially in very dynamic markets to make growth variables comparable.
Going public or the Initial Public Offering (IPO) is a complex and challenging process for the company with a demand for capital that necessitates comprehensive and specialised know-how in all of the phases of going public. We advise and support you continuously and purposefully during every process phase.
- First of all numerous sub-projects are to be processed and organisational changes are to be implemented. What expenditure is incurred here depends upon, among other things, the stock market segment chosen and its requirements.
- For companies which are not yet AGs (stock corporations), transformation into one is now due. If necessary, the changeover of the accounting to IFRS will be required. Corporate governance standards are to be introduced and to be continuously monitored.
- Major elements within the scope of preparation for the IPO are the drawing-up of a business plan and of an issuing concept.
- An indispensable elements on the way to the listing is an independent due diligence.
Upon listing, increased demands are made on the capital market-orientated company regarding the information obligations. With our extensive transaction expertise, PKF's corporate finance experts support you in establishing and monitoring the appropriate process routines within the company in order to comply with the disclosure and reporting obligations.