Os dilemas do empresário e soluções via M&A

M&A solutions to business owner dilemmas
12 de August de 2019 imeri

Even in the case of a business owner who is personally and financially fulfilled, it is common that, sooner or later, they may face various dilemmas by having dedicated a great part of life to the business. These lie in the fact that, in order to achieve financial and professional goals, they had to give up time for themselves and their family and friends. Here are a few dilemmas:. Considering other priorities in life: “Should I sell my company and put some money in my pocket?”

  • “I’ve invested and reinvested all resources generated by the company in the company itself, so that I don’t have enough capital in my personal bank account. How can I balance the company’s risks vis-à-vis my private life?”
  • Considering an advanced age: “Everyday life is getting tougher and I can’t visualize who will be my successor to take charge of the company. Should I: hire an outsider; prepare my children for assuming a role in the Management Board; or sell my shares of the company, either partially or completely, so that another partner assumes its management?”
  • Struggling with the company’s succession: “I wish to continue in the company, but some corporate issues need to be solved quickly. How can I do this?”
  • Realizing that one may lack the knowledge, and technological and innovative background required to survive and grow in an increasingly disruptive environment: “What should be done?”
  • Bearing in mind that the company needs short and medium-term resources to survive or grow: “Which capitalization options are there apart from those available from traditional banks?”

The corporate and entrepreneurial tool of Mergers and Acquisitions (M&A) can provide a solution for all the issues presented above, beyond countless others, if it is well structured. As examples, we may cite the following:

  1. The company’s sale to an investor, a competitor, a strategic player located in the same country or in a foreign one, or even to a client or supplier (a strategy known as verticalization), may bring the business owner’s desired liquidity. However, the operation’s confidentiality and the assertive selection of the targets which will be contacted are crucial to the successful development and conclusion of the transaction. A data leak about the process may affect the company’s image with its clients, suppliers and staff, compromising its performance, which destroys value and lowers the chances of a successful transaction.
  2. A partial sale or the prospection of an investor for the company can solve a lot of the entrepreneur’s dilemmas, such as this asset’s risk mitigation, the solution of succession problems, or the exit of one or more partners from the business, aside from other corporate matters. The transaction can also provide the company with the necessary know-how and resources for the implementation and development of new technologies, and capitalization to promote the business’ growth. However, this mode of operation brings new challenges and matters which need to be closely taken care of, such as: the kind of investor that will be invited to take a closer look at the opportunity; the model of corporate governance to be established between the parts; the level of managerial control that will be bestowed; or the alignment of culture and expectations in the new partnership, among others.

Aside from the warnings regarding M&A cited above, it is of the utmost importance to consider the market scenario “time to market” in the definition of if and when to materialize the partial or complete sale of a company. In Brazil, a business’s agenda is mostly focused on the internal market and the company’s operating radius, and international market movements and tendencies are barely considered. These observations however, allow for the identification of good opportunities for transactions.

In the cases presented above, or in any other, it is mandatory to have a detailed plan and precise execution of the project in order to obtain a successful outcome. Planning should begin with the pursuit of answers to the dilemmas of the business owner.

By dealing with strategic topics, the initial discussions regarding the possible sale of the company should involve only the business owner, the shareholders, and a M&A specialist that has the skills to conduct the project. Once the problem has been defined, it is time to study the diverse options, detail an action plan and execute it carefully.