Join our live online panel discussion with leading international industry experts in scaling businesses.
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Join our live online panel discussion with leading international industry experts in scaling businesses.
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RIEMST, BELGIUM – July 26, 2021 – Financial consulting company Cap Expand Partners are pleased to announce a fresh new approach to business acquisitions, financing, and exit strategies. The company offers exciting windows of opportunity for mid-sized businesses considering expansion overseas, particularly in the Netherlands, Belgium and Luxemburg (Benelux), and also for independent, fundless sponsors.
According to Managing Director Sergio van Luijk, Cap Expand Partners have the experience to help businesses with insufficient resources or local expertise manage cross-border acquisitions. The company’s network of debt and equity providers are also proving invaluable to independent sponsors, for whom raising capital on a deal-by-deal basis can be time-consuming, leading to many missed transaction opportunities.
“The independent (or fundless) sponsor model is still a novelty concept, and many individuals working on transactions fail to raise the necessary funding on time,” says van Luijk, “which can be detrimental to their reputation in future deals. That’s why we encourage them to discuss financing options with us before signing a letter of intent.”
As pandemic-related lockdown measures subside, many companies are renewing their quest for growth abroad. Due to Brexit, an increasing number of foreign companies are now setting down roots in the Benelux when expanding to Europe:
“The U.K. is no longer a first port of call for many of our international clients seeking to gain foothold in Europe,” adds van Luijk. “Most companies we speak with were previously unaware of the Benelux’ favorable investment climate, which is why we are temporarily offering qualified companies affordable market entry and business valuation quickscans.”
Cap Expand Partners’ Corporate Development & Acquisition Services build upon the client’s existing strategy. At this time, the company will educate the client on local market considerations, assess the industry potential, analyze possible entry strategies, and if applicable, identify and approach potential acquisition targets. Cap Expand Partners will then manage the deal process, value the company, coordinate with existing in-house and external local counsel, draft offer letters, and conduct negotiations. Post-closing assistance and capital raisings are also offered as required.
Cap Expand Partners also help raise capital on behalf of independent sponsors. Unlike traditional private equity teams, these are experienced individuals who do not have a dedicated pool of funds and raise financing on a deal-by-deal basis to acquire and manage companies. This allows the client to focus on sourcing new deals, and creating value for the companies that they already own. Additionally, Cap Expand Partners educate their investor network on independent sponsor economics, create credibility towards counterparties, and ultimately streamline these complex transactions. The company recently published an article on the independent sponsor model.
For more information about Cap Expand Partners, or to arrange a consultation, visit the website at www.capexpandpartners.com.
About Cap Expand Partners
Cap Expand Partners specialize in supporting cross-border M&A initiatives with innovative financing solutions. First established in the 1970s, the family business was founded on the belief that mid-sized companies play a vital role in tackling some of the world’s most pressing social and environmental challenges. Under the leadership of Sergio van Luijk, Cap Expand Partners assist companies and independent sponsors through a network of associate partners with cross-border expertise, using modern methodologies more evolved than traditionally used in the industry.
Media Contact
Company Name: Cap Expand Partners
Contact Person: Sergio van Luijk
Email: Send Email
Phone: + 32 12 77 00 67
City: Riemst
Country: Belgium
Website: www.capexpandpartners.com
Private equity helps growing businesses reach scale and new opportunities to thrive. Little wonder that it has become such an important feature of the global financial landscape: investment analysis firm Prequin estimates that private equity assets under management rose from less than $2 trillion in 2012 to nearly $4.5 trillion in 2020. In the US, private equity is no longer limited to investment firms drawing on large pools of capital.
Independent sponsors – formerly referred to as fundless sponsors – draw on their own capital and from funds raised within their networks to complete carefully chosen deals, typically no more than one per year. The independent sponsor model is beginning to take hold in Europe, particularly in the UK and the DACH region, where we estimate 150 independent sponsor groups to be currently active. Throughout Europe, independent sponsors tend to pursue transactions between € 5 million and € 100 million, with equity tickets typically ranging up to € 50 million.
Who are Independent Sponsors?
Independent sponsors are financially literate and experienced individuals with backgrounds in finance, private equity, and M&A who want to build a nest egg or develop a track record to raise a fund at a later stage. They have the skills and connections to source deals, acquire companies, and create value after closing transactions. In both the US and Europe, independent sponsorship is an increasingly popular option for experienced private equity professionals who prefer the greater autonomy and potential return made possible by independent deals.
Independent sponsor deals are structured similarly to the buyouts undertaken by private equity firms. Since independent sponsors do not rely on standing funds, they raise debt and equity when each new deal arises. However, sourcing new deals while raising capital poses significant challenges. Most pointedly, they may find it difficult to secure necessary funding on time, which can be detrimental to their reputation and ability to close future deals.
Where do Independent Sponsors Raise Capital?
There is an abundance of capital in the market, and with the current low-interest rates on bank deposits, private investors are turning to high-yield investment opportunities. From a wealth-management perspective, a balanced and diversified portfolio may include moderate exposure to private equity. However, private investors are searching for net returns higher than what traditional funds offer, as well as more flexibility and control over their investments. As a result, direct deals are becoming increasingly popular.
Direct deals offer more transparency, control, and decision-making authority (see separate article covering direct deals). This is a key reason for independent sponsors to team up with private investors to finance deals. They focus on building their networks of family offices and high-net-worth individuals so that when the opportunity arises, they can secure the equity in a timely manner.
Independent Sponsor Economics
Because the independent sponsor model is relatively new, especially in Europe, it is not supported by an industry-standard compensation plan. Generally speaking, an independent sponsor will charge a one-off payment as a transaction fee, paid when the deal is closed. The transaction fees can range between 1% and 2% of a transaction’s value. Beyond that, if an independent sponsor’s job is to manage the investment and actively oversee day-to-day operations, their compensation plan will also include a healthy salary and benefits. Active board-level advisors, on the other hand, receive a management fee. Lastly, performance fees represent the largest component of an independent sponsor’s compensation. These tend to run between 10% and 15% of realized returns. Hurdle rates typically range from 8% to 10% of IRR, depending on the sponsor’s strategy and goals.
Advantages of Independent Sponsorship
Independent sponsorship offers various benefits beyond potential financial upside. The independent sponsor model represents an opportunity for talented individuals to utilize their skill sets with a higher degree of autonomy than they would as employees of traditional private equity funds, offering the opportunity to create significant personal wealth. Private equity professionals working as employees of traditional funds may experience limited upside potential and unclear paths to partnership. By using external sources of funding, the independent sponsor model presents an opportunity to be rewarded more fully for value created.
The Entrepreneurs in Private Equity
Independent sponsors represent an entrepreneurial inflection of the traditional private equity model. Despite their relative novelty, they are acknowledged by private equity associations as a separate asset class. As the independent sponsor model becomes more mainstream, many talented individuals with backgrounds in finance are increasingly forming their own independent sponsor groups to take advantage of this exciting new model. For more information on the independent sponsor model in Europe, download our free PDF article or reach out to us to discuss financing options.
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Mergers and acquisitions (M&A) are a great opportunity for companies whose growth potential exceeds their ability to acquire more market share organically. However, M&A is a complicated process and should not be undertaken lightly. In 2020, M&A activity slowed down around the world, primarily due to the COVID-19 pandemic. As companies regain their footing, M&A activity is picking back up. This is especially true of cross-border M&A.
Cross-border M&A is similar to domestic M&A, but can be far more complicated. In most countries, a foreign company cannot directly acquire a local business. Instead, it must establish legal entities in the target country through which the transaction is processed.
Cross-border M&A is by far the boldest of many ways to expand business internationally. Although these transactions carry additional risk, they can yield rewarding results if managed correctly.
Cross-border M&A is a global phenomenon, but it is extremely popular in countries with a history of economic liberality. This is why Europe is ideal for cross-border M&A. After Brexit, companies whose European operations were weighted heavily toward the UK are naturally looking to expand their operations far beyond the borders of Britain. Increasingly, companies in this situation are focusing their attention on the Benelux region (Belgium, the Netherlands, and Luxemburg). This region’s promising investment climate has established it as an exceptional point of entry for businesses wishing to expand into Europe.
The Benelux is the perfect spot for businesses to thrive. It is a vibrant and forward-thinking market that has shown resilience even during the pandemic. The region has established itself as an attractive foothold for a growing list of global companies seeking to expand into Europe. This is especially true in the aftermath of Brexit, with the UK removed from its traditional role as an entryway to Europe and economic uncertainty still looming over much of the continent. Its stability and commitment to international trade lead us to believe that the Benelux region will remain attractive for M&A activity, and we expect to see current M&A trends continue over the coming years.
The global market is full of opportunities, but the process of expanding outside your home country can be daunting. Cap Expand Partners have the experience and expertise in navigating international M&A transactions from start to finish to help you capitalize on new markets with minimal risk.
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Cross-Border M&A Activity in Europe
For companies whose capacity for growth exceeds their ability to add market share organically, mergers and acquisitions (M&A) represent an opportunity to achieve greater scale in a single step. Of course, that step is complex and should never be taken lightly, doubly so when it involves the acquisition of an overseas business.
Around the world, M&A activity slowed dramatically in 2020, largely due to the uncertainties of a global market deeply affected by the COVID-19 pandemic. As economies find their footing in 2021, M&A activity has heated up as well. This is particularly true of cross- border M&A, which have adapted to the added complications represented by subsiding pandemic-related restrictions imposed by different jurisdictions.
European cross-border M&A continue to rise with inbound M&A recording sizeable increases compared to the first six months of 2020. In Europe, 6 of the largest 10 M&A transactions involved a foreign buyer, driving the total European inbound number to 747 deals in the first half of 2021 vs. 645 during the same period in the preceding year1.
The Benelux (Belgium, the Netherlands, and Luxemburg) has established itself as a compelling point of entry into Europe’s economic landscape, offering a favorable investment climate, particularly for foreign companies without a local presence seeking to expand to the rest of the continent.
With cross-border M&A now back on the table as an option for ambitious businesses looking to expand to Europe, let’s take a look at what these entail and how they affect the prospects of the companies involved.
What Are Cross-Border M&A?
Structurally, cross-border M&A resemble domestic M&A, with an added layer of complexity. In most jurisdictions, a foreign company may not directly acquire a domestic firm. Rather, it must establish a legal entity in the acquired company’s country and process the transaction through that entity.
Complicated though it may be, this is not a simple matter of bureaucratic meddling. Establishing a legal entity clarifies the lines of fiscal and regulatory responsibilities and can greatly facilitate the deal’s consummation and success in the period thereafter.
The structure of any given deal is subject to a wide range of factors, most of them to do with the jurisdictions in which each party operates and the pursued strategic goals.
From a strategic point of view, cross-border M&A are the boldest form of internationalization. Companies considering overseas acquisitions typically benefit from evaluating other options as well, including contracted relationships, joint ventures or other strategic partnerships to extend operations internationally.
The acquired company typically realizes strategic advantages as well, including access to new sources of capital, in addition to more diverse market and client exposure.
Where Are Successful Cross-Border M&A Opportunities to be Found?
As a business proposition, compelling cross-border M&A opportunities exist around the world. For example, Red Bull, the world’s best-selling energy drink, was devised in Thailand as Krating Daeng, a refreshment for working-class laborers. An Austrian entrepreneur took notice and in 1984 created Red Bull GmbH, a legal entity, in Thailand as part of a joint venture to adapt the drink to Western tastes. Red Bull is now headquartered in Salzburg and generated 2020 revenues of over €6 billion, or $7 billion, while Krating Daeng continues to operate throughout Southeast Asia, with heirs of the drink’s creator owning majority stakes in both companies.
Red Bull is something of a unicorn, and few cross-border transactions are as globally successful. But it does illustrate some important elements supporting any fruitful cross- border M&A effort. Krating Daeng had a winning idea, a mature business model, an insightful approach to marketing, and a proven operational infrastructure that allowed it to grow without exceeding its grasp. Both sides brought foresight, discipline, and good faith to the table, and each profited remarkably well. Crucially, the Red Bull deal was struck during a time of political stability and economic growth in Thailand.
While cross-border M&A opportunities remain widespread, they are facilitated by countries with a continued tradition of economic liberality. For that reason, Europe has emerged as a compelling ground for cross-border M&A.
The impact of the Pandemic and Brexit on Inbound M&A Activity in Benelux
As companies embark on the path to recovery, preparing for a transformed world with reshaped economies and societies, the need for alternative M&A and financing strategies is greater than ever.
In the wake of Brexit, companies have started looking elsewhere to set up their operations for expansion into Europe. The Benelux provides vast opportunities for growth with a dynamic and forward-looking market that has showed resilience even in the midst of the COVID-19 pandemic.
The numbers bear this out. In the first half of 2021, non-European, non-UK acquirers targeted 42% more Benelux companies in M&A transactions than in the preceding years. The year-over-year increase for UK-based M&A targets in similar transactions was just 29%, slightly behind global M&A transactions into all European countries, which increased 30%. Excluding private equity transactions, the disparity is even more dramatic: a 49% increase in transactions targeting Benelux companies, a mere 7% increase in activity targeting UK companies, and a 20% increase in global M&A transactions targeting European businesses 2.
We expect similar M&A trends will continue. The full aftermath of Brexit is still unfolding, and within Europe the Benelux remains a distinctly inviting foothold for global companies seeking to expand into the continent.
As a recent example, Cargill, a global food corporation and one of the largest privately held companies in the US, acquired Leman Decoration Group as part of its strategy to expand its presence and product line in the gourmet space.
Leman Decoration Group serves customers in 55 countries. Its portfolio consists of cake decorations, chocolate printings, sugar-based decorations and wafers. Cargill sought to expand into the cake decorations segment, building upon its existing chocolate- manufacturing expertise. This acquisition fits Cargill’s broader strategic vision of becoming a “bean-to-decorations” provider in the industry.
Through combined resources, knowledge and expertise, Cargill expects to benefit from synergies that will enable both companies to better serve the changing needs of their customers. Cargill aims to become a one-stop-shop for its customers, and explicitly stated when the Leman acquisition was announced that its recent acquisitions will open up avenues for long-term growth and profitability in Europe.
Since the beginning of the pandemic, Cargill has announced seven acquisitions. Three of those involved European targets, two of them in Belgium and the Netherlands.
Why the Benelux is an Ideal Stepping Stone into European markets
Strategically located, the Benelux serves as a gateway to other countries in the European Union (EU) with a potential to reach over 500 million consumers. The region offers some of the world’s best airports, road networks, (containers) ports, and rail connections to the rest of the continent, making it an appealing option for overseas entities seeking to gain a foothold in the EU.
The Benelux’s political environment is very business-friendly, fostering entrepreneurship and enabling innovation to thrive. Supported by reputable universities, the regional, English- speaking workforce is one of the most skilled in the world.
The region offers favorable tax regulations to non-EU members, even those who do not establish themselves through M&A, including VAT payment deferral for imported goods. The Benelux further entrenches its business-friendly, cross-board policies through tax treaties with numerous countries as well as individual tax rulings.
The Benelux’ flexible company law and its neutral jurisdiction make it an attractive location for foreign investors. The process of setting up a legal entity is very straightforward. In the Netherlands, for example, a BV (Besloten Vennootschap), the equivalent of a private limited company in the UK or an LLC in the US, is a paper entity executed and authorized by a notary with limited costs and efforts.
The Benelux has a long and proud history of fruitful economic ties across international borders, and prides itself on its promotion of foreign investment. Due to the region’s relatively small size, 3-5 out of 10 M&A transactions are by default cross-border.
Cap Expand Partners: Financial Experts with Cross-Border M&A Experience
Taking your company international will involve long-term operational and organizational adaptations, but the transaction itself is essentially an economic one. Cap Expand Partners have the experience and professional network to guide you through the entire process, from pre-transaction planning through to execution of each stage of the M&A process, as well as post-merger integration.
We begin by listening to you and gaining a thorough understanding of your overall growth strategy and the benefits you expect to gain from expanding overseas. The next step focuses on the market you wish to enter. We prepare a strategy assessment that clearly defines your M&A objectives and measures them against the legal, regulatory, and economic realities of your chosen market. We then prepare a list of M&A targets that meet your needs, and continually revise that list until we agree on a suitable opportunity.
Once you have chosen a target company, we approach it on your behalf, equipped with a comprehensive plan to execute the transaction. After our first approach, we perform due diligence on your target company while preparing your M&A investment thesis. It may be wise to walk away from a deal at this stage if our research uncovers significant barriers to fulfilling your international strategy. On the other hand, this phase may uncover potential opportunities for mutually beneficial synergies that may not have been apparent in earlier stages.
As the transaction reaches its final stages, we work with your executives and upper management to establish the infrastructure necessary to complete the deal. Throughout negotiations with the target company, we provide the technical and qualitative research that helps you strike the best deal both for your own company and for the long-term prospects of its international presence.
The months that follow any M&A deal are crucial to its success. To help our clients realize the full value of their transactions, we stand by them during this critical time, providing a detailed integration roadmap, addressing due diligence issues, and helping them harmonize both their operations and strategic planning. We also work with our client’s integration manager to ensure that everything from the integration framework to the specific policies governing the transition support a smooth and profitable union.
Once every party to the M&A is satisfied with the integration, we perform a retrospective analysis of the entire transaction, from its first speculative steps to its demonstrated success. This analysis helps inform our own practice, and can be an indispensable guide to your company’s future as an international enterprise.
Companies with the vision, resources, and ambition to pursue cross-border M&A in Europe can set themselves apart from the competition and uncover new business opportunities before others notice them. The process inevitably represents a step into the unknown, but Cap Expand Partners offer the experience, expertise, and resources necessary to take that step with confidence. [/signinlocker][/vc_column_text][/vc_column][/vc_row]
Despite the pandemic, 2020 was a record-setting year for the wealthiest people in the world. In 2020, personal wealth surged by $5 trillion, producing more new billionaires than ever before. “Going direct” has become a trend over the last couple of years. It represents not only a shift of companies operating in the private tech and consumer space, but also a shift in family office investments. Family offices have become more sophisticated, and a passive Limited Partner (LP) structure may no longer the most practical. Wealthy families are investing directly in private companies. Direct investing happens through single-family and multi-family offices.
Today’s environment is characterized by low interest rates, unstable geopolitical conditions, and unpredictable financial markets. In this environment, wealthy families seek better returns, which often lead them to consider direct deals.
Why are direct deals appealing?
Direct deals provide greater decision-making authority, better transparency, and more control over other investment drivers. Direct investing gives family offices the opportunity to better align their objectives and interests with their investment strategies. Reduced fees and costs are also significant drivers of the direct-investment trend. Family offices have begun to broaden their networks, just like their private equity peers have done. They have done this to keep up with market trends and to stimulate proprietary deal flow. Direct deals also invite opportunities for themed collaboration, such as sustainable and impact investing. Such forms of investing are especially appealing to younger generations.
Family offices have characteristics that differentiate them from typical direct-deal investors. Direct investing has emerged as an important tool for family offices that aim for higher returns and more control. Because they are not restrained by strict mandates, family offices provide more flexibility than institutional investors. A family’s experience in a given industry can also give them an edge over the competition when chasing deal flow.
Is coinvesting sustainable?
Family offices must continue to focus on building out their platforms and budgets, just as private equity platforms do. However, the cost of this effort cannot be spread across several investors, since the office only has one client. This puts added pressure on investors to make profitable deals with high returns.
This trend shows the emergence of a new cooperative investing model in which family offices new to direct deals work with others who do have direct-deal experience. Larger family businesses are often willing to partner with smaller family offices while scaling up. Furthermore, these partnerships help disintermediate private equity funds and transfer knowledge while building a direct-deal team. Many family offices are eager to co-invest: 49% want to do more co-investing, while 44% want to maintain their current co-investing activity.
However, there are several challenges to co-investing. One of these challenges is the difficulty of identifying attractive deals. Other challenges are performing due diligence and aligning a given family office’s values and objectives with those of potential partners.
What is the best way to make direct deals?
Firstly, direct investments can be difficult. Family offices must build an in-house team to generate deal flow and provide operational support for their investments. Building a team internally can cause an inefficient use of resources. A well-considered process with assistance from external advisers can help family offices achieve desired results without committing long-term capital upfront. Family offices are often in contact with independent sponsors, investment funds, and other family offices. With the help of experts, family offices can leverage these connections profitably, helping ensure a steady deal flow.
For independent sponsors in Europe, family offices are a desirable source of capital, especially for smaller deals. The independent sponsor structure is mutually beneficial. Family offices find it appealing because they acquire controlling powers over the company’s investment terms, investment decisions, and projects.
It takes time to develop a successful direct investing strategy. Cap Expand Partners advise your company about complementary partners. We support clients in areas such as strategic partnership negotiations. With our expertise and resources, we will help you find the best opportunities for your corporate strategy. We can assist you in going direct, as the current trend toward such deals is likely to endure.
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Demand in the pet food industry is driven by pet ownership, which has increased significantly since the beginning of the pandemic. During a period of isolation and loneliness, the importance of pets, particularly dogs and cats, has become undeniable. The surge in the number of “pandemic pets” fueled a greater demand for pet food. While other industries face economic challenges, the pet food and supplement industry has been flourishing.
A flourishing industry
Individual companies’ profitability relies on effective marketing. Growth opportunities for new and smaller companies and new entrants lie largely with specialized products or local markets. Conglomerates in the pet food industry benefit from economies of scale in processing, distribution, and marketing. Exclusive research by Cap Expand Partners reveals that pet expenditure increased by approximately 50 percent during the pandemic, when pet food and treats were considered to be an essential industry. This trend is in line with market observations resulting from the financial crisis in 2008, when the pet food industry exhibited similar resilience.
Cap Expand Partners help clients in a broad range of industries to guide them navigate change and uncertainty. During the evolving pandemic economy, we work closely with our clients in their quest for growth. We offer tailored M&A and financing solutions to businesses in niche markets such as pet food.
Pet food industry dynamics
Based on discussions with leading industry players, Cap Expand Partners has identified several important trends and opportunities.
Proliferation of eCommerce
During the pandemic, e-commerce got an unprecedented boost. Online sales surged, even in developing countries. This trend helped the pet food industry thrive during the pandemic. For example, Chewy, already a top-ranking online pet food segment, benefited tremendously from the shift toward digitalization.
Increase in per Unit Spend on Pet Food
Solitude was a key driver of increased pet adoption during the pandemic. This translated into greater demand for pet foods and treats. The unpredictable patterns of impending lockdowns resulted in excessive purchase of pet food supplies.
Pet food industry segmentation
The pet food market can be segmented as follows:
At specialist retailers, private food labels such as Sainsbury and Saturn Petcare are competitively priced.
Conventional pet foods such as Whiskas and Pedigree represent a lower price range. These brands focus on higher sales volumes and often reduce production costs by adding relatively large quantities of grains and other filler.
Some larger consumer goods companies produce higher-end pet foods marketed as being scientifically formulated. Major brands in this category are Pro Plan by Nestlé and Royal Canin by Mars.
Premium food labels are highly attractive and closely resemble human trends such as super-food and organic pet foods. Major brands in this segment include Cesar and Orijen.
Investment opportunities in the pet food industry
By targeting specific themes and niche markets, we provide our clients with professional corporate finance services. Cap Expand Partners’ pet food industry research focuses on the following four areas and respective investment themes.
Consumables
Greater creativity in formulation and sourcing of healthy, natural ingredients
New manufacturing facilities, local sourcing, and supply chain transparency
Greater use of sustainable and environmentally friendly packaging
Key investment themes
Targeted investments to capitalize on the above trends
Roll-up of smaller snack brands
Non-consumables items
Several pet start-ups using new technologies and business models
Greater offerings of innovative products to enhance engagement among pet owners
Pet owners seeking toys and products for activity and wellness-promotion
Key investment theme
Fragmented accessory space presents roll-up opportunities
Service providers
A greater degree of services catering to pets and pet owners
Increase in luxury grooming and boarding services
Veterinary consolidation as major chains acquire smaller practices
Key investment themes
Consider roll-up of independent groomers and vets
Launch franchise model for groomers
Pet retailers
Premium mass consumables at mass retailers
E-commerce representing a growing share of total pet care retail sales
Key investment themes
Focus on scaling regional chains
Invest in e-commerce players or support for large retailers’ online operations
Trends are always interesting to follow, but can be difficult to exploit. Cap Expand Partners helps you capitalize on the aforementioned trends and others, helping you become more profitable, now and in the long run. Let’s get in touch and see how we can help your business grow.
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In an age of digitalization, the adage “change is the only constant” applies more than ever. Companies need to reposition themselves to compete in the digital era. This process requires a shift in strategic priorities and an adaption of existing business models. It may also demand a merger with or acquisition of other companies to benefit from their talent stock (acqui-hires).
As a corporate finance company, Cap Expand Partners actively uses data to analyze industry dynamics. We test the market’s pulse, build models to predict behaviors, optimize throughput and automate processes. Connectivity enables us to deliver client results more effectively.
M&A and marketing networks
Over the last several years, acquisitions have been dominated by private equity, and by marketing and consultancy services firms. For large marketing and communication networks, M&A is a key strategic tool, helping catalyze growth by incorporating the latest insights into established operations. Digital entrepreneurs often seek partnerships with major organizations. The prospect of increasing their geographic reach, strengthening their capabilities, enhancing their offerings, and expanding their clientele is enticing. Yet this may come at the expense of their core competency, their passion, and even their identity. Finding the right partner is therefore of paramount importance.
Cap Expand Partners’ industry insights suggest that many consolidators acquire businesses that contribute towards expanding their service offerings. Their acquisition strategy seeks to add vigor and scope to their client relationships. We foresee a continued acceleration in cross-border M&A activity involving online marketing companies.
Cap Expand Partners provides M&A and financing solutions to business owners, managers, and sponsors. Our long experience working with leading organizations and collaborating with operating partners on key transactions enables us to speak our clients’ language and to work more effectively with them.
Trends influencing online marketing
To stay up-to-date on the latest developments in the online marketing space, Cap Expand Partners recently conducted an insightful market study including input from several key industry players.
Market convergence helps drive the digital marketing sector. Creative agencies support firms in combining their technology, strategy, and creativity. All the building blocks for success are now linked together. Convergence increases the potential for integrated marketing agencies.
Another important trend is internet and mobile migration. The time we spend on our smartphones and on the internet continues to grow. This increase in digital consumption affects customers’ shopping behavior and creates new opportunities for market players.
Data and marketing
Targeted and personalized advertisement experiences are a trending practice. Digital platforms enable brands to connect to precisely defined, highly desired customers. Digital advertising allows for targeted one-to-one engagement between brands and consumers. This form of engagement leads to enhanced brand loyalty. As a consequence, data-driven marketing trends have accelerated. As consumers become more demanding, it is vital to understand their needs based on data. The effectiveness of marketing initiatives must be monitored, tracked, and managed with relevant metrics, including ROI.
Where we come in to play
Cap Expand Partners provides professional corporate finance services. We help our clients make informed investment and financing decisions. In our fast-paced digital world, finding the right strategic or financial partner can be a critical success factor, and we look forward to getting to know you and your business. Let’s connect and see where we can deliver extra value for your business. Fill in your contact details to receive the full report.[/vc_column_text][us_btn label=”GET IN TOUCH” link=”url:https%3A%2F%2Fcap-expand.com%2Fschedule-a-call%2F|title:Schedule%20a%20call” style=”6″ el_class=”button”][us_btn label=”BACK TO ARTICLES” link=”url:https%3A%2F%2Fcap-expand.com%2Farticles%2F|title:Schedule%20a%20call” style=”7″ el_class=”button”][/vc_column][vc_column width=”1/3″ css=”%7B%22default%22%3A%7B%22position%22%3A%22fixed%22%2C%22z-index%22%3A%22999%22%7D%2C%22tablets%22%3A%7B%22position%22%3A%22fixed%22%7D%7D”][vc_column_text][optin-monster slug=”avkuoazx2tpbpczgax6x”][/vc_column_text][/vc_column][/vc_row]
The concept of working from home (WFH) evolved from an experiment to a reality, accelerated by the COVID-19 pandemic. It became a necessity rather than a choice as employees were forced to work from home. Remote work leads to new opportunities as well as difficulties. This new way of working impacts business valuation, and by implication M&A. While adjusting to this new mode of working, M&A transactions are still on the agenda.
Cap Expand Partners advises and assists company owners to make informed M&A decisions. Furthermore, people come to Cap Expand Partners for advice in financing company acquisitions, growth capital, business valuations, and more. We support our clients’ strategic growth ambitions on a global scale.
Remote work – the new normal
The COVID-19 pandemic forced us to pursue new ways of working; WFH became the norm. COVID-19 provided us with the opportunity to design a new workforce model. This model helps retain talent and increases productivity.
Companies have a variety of WFH options, ranging from fully remote to hybrid models. Many companies have employees work three days in the office and two days remotely, with two days off. This “3-2-2 workweek” has the potential to lead to greater access to talent, increased productivity, lower costs, and lower employee turnover. Each of these factors is of great importance to overall business valuation.
Structural shift in many industries
Pandemic-related lockdown measures have transformed workplaces, consumer behavior, and spending patterns across industries. We believe these changes will have a long-term impact on markets and the economy. In the apparel industry, we expect the shifts towards e-commerce and online shopping are here to stay. Logistics and digital payments have been positively impacted by remote work as well, while demand for most transportation, business travel, and restaurants in downtown areas declined. As a result of the COVID-19 pandemic, business travel has suffered, with deep impacts on the commercial aerospace and hospitality industries.
Many industries see new opportunities in the WFH climate. Numerous companies are enhancing the deployment of automation and AI in warehouses and manufacturing plants. Furthermore, the commercial real estate market has been deeply affected by the WFH trend. With fewer workers in traditional offices, there will be less non-residential construction. The demand for suburban residential construction is expected to increase as people move to smaller cities. This results in opportunities for single-family rental REITs. The automobile sector faced a decline in short-term individual sales. However, increased demand for delivery and cab services compensated for this.
Win-win for all?
The WFH culture potentially provides employees with greater freedom to pursue their careers, more flexibility, a better work-life balance, and time to spend with their family. However, the long-term mental impact on our society remains to be seen.
The cost-of-living gap between large and small cities continues to widen. Remote work allows employees to move to more affordable places. While employees move to different areas, many companies will still work with their most skilled staff. Companies with large offices and commensurate real estate expenses have the opportunity to save money on rents and leases by moving to smaller facilities. Most companies value sustainability, which includes cutting their carbon footprint. The WFH culture can provide a nudge in the right direction by reducing energy consumption, while employees contribute by reducing vehicle pollution.
Impact on business valuation
In certain industries, such as manufacturing, a wholesale WFH structure is not feasible. However, with the right processes, technology, and leadership, more functions can be performed remotely. Tech start-ups have the strategic advantage of incorporating WFH from the very beginning.
We expect a continued demand for better digital infrastructure and initiatives to help employees update their skills. Shifts from existing office leases and related onsite expenses result in immediate, and in some cases lasting, margin expansions. Investing in the technological needs and overall well-being of remote workforces helps to achieve high productivity. Resources such as home office equipment may qualify as one-time expenses and be added back to EBITDA, an important measure of the company’s overall financial performance.
On the other hand, poorly implemented shifts to WFH may hinder growth opportunities. This transformational period calls for close monitoring of each company’s valuation.
The new workforce system, accelerated by the pandemic, can have a major impact on your company’s business valuation. Our expertise at Cap Expand Partners allows us to objectively and independently assess the value of your business or that of a potential acquisition. From establishing a clear strategy to achieve your goals to providing insights into your company’s valuation. To learn more about our valuation services, please contact us directly.[/vc_column_text][us_btn label=”GET IN TOUCH” link=”url:https%3A%2F%2Fcap-expand.com%2Fschedule-a-call%2F|title:Schedule%20a%20call” style=”6″ el_class=”button”][us_btn label=”BACK TO ARTICLES” link=”url:https%3A%2F%2Fcap-expand.com%2Farticles%2F|title:Schedule%20a%20call” style=”7″ el_class=”button”][/vc_column][vc_column width=”1/3″ css=”%7B%22default%22%3A%7B%22position%22%3A%22fixed%22%2C%22z-index%22%3A%22999%22%7D%2C%22tablets%22%3A%7B%22position%22%3A%22fixed%22%7D%7D”][vc_column_text][optin-monster slug=”avkuoazx2tpbpczgax6x”][/vc_column_text][/vc_column][/vc_row]
At the beginning of the pandemic, global M&A came to a standstill. Companies focused their attention on keeping employees safe and businesses running during the historic disruption. As companies embark on the path to recovery, preparing for a transformed world with reshaped economies and societies, the need for alternative M&A and financing strategies is greater than ever. Cap Expand Partners provides business valuation, M&A advisory, and capital raising solutions to help realize growth in the (post-)pandemic economy.
Impact on businesses
COVID-19 radically transformed the global business environment and produced long-lasting shifts in consumer behavior. At the beginning of the pandemic, companies paused their pursuit of new M&A deals, lacking a clear view of the future marked by uncertainty. However, during a period of remote operation, organizations have shown great tenacity, reshaping their organizations to tackle the crisis and empowering teams to make decisions more quickly.
Despite the challenges surrounding long-term planning, there is a historic opportunity for organizations to rethink their business models. Long-term resilience can be achieved by evaluating strategic priorities. Years will go by before we will be able to distinguish temporal disruptions from long-lasting impacts. Although we cannot yet grasp its full extent, COVID-19 has taught businesses to be prepared for unexpected events that radically transform business management and society as a whole.
How companies have adapted their M&A strategies
Appetite for M&A remains strong despite the pandemic. Companies and PE firms have accelerated adoption of virtual tools to facilitate deals, and rapid digitalization has helped the recovery in M&A activity. Despite these developments, the in-person part of deal-making is difficult to replace. Performing operational due diligence remotely remains inconvenient. Nevertheless, the majority of decision makers with whom we speak with remains optimistic that M&A will continue to be a driver of their companies’ future growth.
Changes in investing trends
Society’s expectations for businesses are changing. Evaluating environmental, social, and governance considerations has become pivotal, as has the overall focus on sustainability. Furthermore, companies contemplating M&A deals need to prepare for new regulatory challenges. Regulators are honing in on their impact on cybersecurity, competition, and national interests. Particularly for tech companies, concerns regarding data security and privacy continue to rise. This new environment is not conducive to cross-border dealmaking.
We anticipate shifts in investing trends due to changes in risk tolerance caused by COVID-19. As minority shares allow for greater flexibility and the opportunity to test the waters from a geographical and market perspective, we expect a relative decline in acquisitions involving full ownership.
Make-or-break time for businesses
Government surplus, abundance in capital markets, and low interest rates have sustained higher valuations. Industries such as technology and pharmaceuticals have particularly benefitted during the pandemic. However, concerns regarding an increasing number of ‘zombie firms’ are real. As the economy pulls off the government welfare band-aid, we will start to see the severity of the wound.
The pandemic has reinforced the necessity to adapt quickly in order to survive, which includes the use of defensive M&A strategies. In order to address current and future challenges, we expect managers will acquire new capabilities to reshape their business models. As they continue to streamline their portfolios to focus on core strengths, we expect M&A will continue to be a key component of strategic agendas. [/vc_column_text][us_btn label=”GET IN TOUCH” link=”url:https%3A%2F%2Fcap-expand.com%2Fschedule-a-call%2F|title:Schedule%20a%20call” style=”6″ el_class=”button”][us_btn label=”BACK TO ARTICLES” link=”url:https%3A%2F%2Fcap-expand.com%2Farticles%2F|title:Schedule%20a%20call” style=”7″ el_class=”button”][/vc_column][vc_column width=”1/3″ css=”%7B%22default%22%3A%7B%22position%22%3A%22fixed%22%7D%2C%22tablets%22%3A%7B%22position%22%3A%22fixed%22%7D%7D”][vc_column_text][optin-monster slug=”avkuoazx2tpbpczgax6x”][/vc_column_text][/vc_column][/vc_row]
