In this article I will give you an update on our plans and progress with the M&A industry teams across Europe. CFIE has a large number of advisors across Europe whom all have knowledge of specific industries. We are getting these advisors, together to form an European industry team. They cooperate in sell and buy side mandates across Europe for their specific industry. The first two industries in which we have started this initiative are Plastics and IT.
I am interested to hear your thoughts on this initiative and if it makes any difference for you as a buyer or as a seller.Here an overview of the actions we take to grow our impact in specific M&A markets:
t is important to understand the M&A landscape across the different industries in Europe. As an example it is difficult to understand why there is various hundreds of IT M&A advisors across Europe and only a few independent M&A advisors in Plastics. In practice there are many more independent advisors in the IT industry. In each country we come across a large number of advisors in the IT services and software industry. Whereas in the plastics industry we hardly see independent advisors. Of course there is a lot more IT companies compared to plastic companies. However, not to such an extent that could explain the difference in numbers of advisors. For each industry the M&A landscape is different. We see advisors being successful by focusing on a specific industry, where they have large experience. These advisors have had high level positions in their field (CEO, CFO, etc) and became independent afterwards. Their industry knowledge helped them to get a strong position as a M&A advisor in their industry. Mostly they start providing their services locally. We also see a few of them expand across Europe in a later stage. An example of an advisor with strong industry skills in our team, for the IT industry, is Jarmo Kuusivuori. Here some more details on him: www.corporatefinanceineurope.eu/advisors/mergers-acquisitions/jarmo-kuusivuori.htm
Regarding the size the situation is as follows: For larger deals (enterprise value >50m €) we often see the bigger investment banks or Big4 having a mandate to sell a company. There is not that much difference in doing a 10,20 or 50m € transaction, but sellers often give the mandate to a well known name with reputation. This can be done to exclude risk in case a transaction goes sour. Then the person in the company who gave the mandate is protected and can point to the external advisor. We are comfortable with larger transactions, but are mostly active in transactions with a value of 3 to 30m €. Advising smaller firms, with valuations of below 1m €, is often difficult in practice. Selling to international, European buyers, is mostly not possible due to a lack of interest for the aforementioned size. Quite often these sellers only want to pay advisors on a success basis. Executing a high quality sell side mandate is difficult in such circumstances. Helping smaller companies is of high importance for the European economy. In case smaller companies are not sold and need to stop economic activity is lost. We want to contribute our piece to helping these sellers. We do have ideas how this can work in a more cost effective way for sellers. More details I will probably provide in one of the future newsletters.
What I have seen over the last decade is that an interest of M&A advisors exists to cooperate on projects in their industry. However, business sales need to have a certain size to make it attractive for international buyers. This means that many projects don’t qualify for cross border transactions. Further, advisors obviously look at their own transactions first and often they are so absorbed by their own transactions that limited time exists to support other advisors with their projects. Some people say that the European economy is already quite integrated in the area of M&A. That might be the case at a certain level, like for the larger deal sizes like above 50m €. There is of course a good number of deals happening between neighbouring countries like Germany and Austria or Switzerland. However, transactions between companies from Finland and Spain or Portugal are less likely to happen especially below valuations levels of 10m €. This makes growing an European M&A industry team like for IT and software companies not an easy project.
Getting to a really integrated European M&A industry team (like for IT) is hard work where the team needs to increase the cooperation step by step. This can be done by having regular calls, joint marketing, meetings and one on one exchange of information. The CFIE back-office plans to support the team with mailings, by bringing international buyers and other activities that help the independent CFIE M&A advisors.
If you are a M&A advisor with specific industry knowledge and are interested in joining a CFIE industry team please reach out to me. We are always interested to speak to M&A advisors with strong industry skills.
We are also thinking about an industry specific newsletter for industries where we are very active. One of the industries we plan to start with is plastics and automotive. If you would be interested to subscribe to the plastic industry specific newsletter please get in touch with me.
If you want to sell your company will you be more inclined to go with an industry specific advisor compared to a generic one? Who of these 2 different advisor groups will be more successful in the business of M&A? If a M&A network has a strong industry background, experience and team, does this make a real difference in the perspective of a buyer or seller? Please gives us your thoughts and opinion on these questions below.