Waste & Environmental magazine
An extract from an interview with Anna Gregory from gunnercooke llp.
Anna Gregory is a Partner at gunnercooke llp, a legal firm that specialises in advising medium and large corporates on acquisitions and disposals of other businesses. Anna has vast experience in structuring and leading transactions in the waste sector, acting for a number of large corporates, and has even worked in the industry for a number of years as in house M&A advisor for Enterprise plc. Here she shares her outlook and predictions for the sector, and some advice on some of the things to consider if you are involved in a transaction.
Q: Tell us a bit about your experiences in our sector Anna?
A: I am a corporate partner advising medium and large corporates on acquisitions and disposals. I have specialist knowledge of waste and environmental businesses as I act for a number of large acquisitive clients in these sectors. I also have worked in industry for a number of years as in house M & A adviser for Enterprise plc.
Q: What are your predictions for 2012?
A:2012 looks like being a busy year for management teams in the sector as corporate deals of all shapes and sizes continue to proliferate the market. The waste and environmental sector is a lively place to be in terms of mergers and acquisitions due to a combination of positive market conditions and entrepreneurial board directors keen for growth. Deal volumes for Q3 of 2011 were almost double that of the same quarter in 2010. This has been largely driven by a significant increase in the number of acquisitions made by overseas parties.
Q: Briefly, what do boards/managements teams need to consider when looking to buy or sell?
A: How the transaction is structured is important.All corporate deals can be structured differently. If a deal is structured properly from the outset (both from a financial and commercial perspective) it should benefit both parties and enable the process to be run smoother and be more efficient. Some target businesses are better suited to a share acquisition, some better suited to an asset acquisition.
Whether it’s an asset or share acquisition some transactions in this market are ‘bolt-on’ deals where a company sees another company providing the same service to the same market and decides to simply grow through the acquisition of that company. A ‘bolt-on’ deal enables a company to increase market share, achieve economies of scale, greater geographic spread, improve customer experience or diversify risk.
Due diligence is also a key aspect of any deal and too many acquisitions fail because of poor research from the outset. Due diligence will check amongst other things, contracts, regulatory issues, tax implications, staff issues, intellectual property rights, on-going disputes etc.
Integration is another key aspect of any corporate transaction. On larger deals a dedicated M&A (mergers and acquisition) team may take responsibility for joining up procurement, HR, operations and logistics. Real value can be added here and it is this process of integration that is most commonly overlooked. The integration process should be planned well in advance of completing the deal.
Project managing the due diligence and integration process is fundamental to a successful outcome and having the right advisers working alongside your teams can add real benefit and value. It is important your advisers fully understand your sector and how you operate as a business.
Timing is very important.Management teams and their advisors spend a large amount of time (ironically) planning the timing of a deal. An acquirer needs to ensure that it is not buying a company at the peak of its profitability. There needs to be some opportunity to make it more profitable in the future and there needs to be some value in terms of assets or secured contracts with key customers. Getting that balance right on both sides is all about timing.
Any key legislation looming may also have an effect on the success of a deal. That could be environmental legislation or something fiscal like a change in tax policy. A minute change in tax policy could have a devastating effect on the value of the deal or the feasibility of a successful outcome.
Price is also fundamental to any transaction.Is the price right? At the most basic level, the price paid is normally a multiple of the profit made within the target business; checks need to be made to determine whether the profit and forecasts are reliable and a true reflection. Your advisers should be able to provide you details of recent transactions and multiples to ensure the price you are paying/receiving is a reflection of current market practice.
Q: If I am looking to sell how do I protect my proceeds?
A: Sellers should work with their advisers at the outset to groom the business for exit which means ensuring that the business, financially and operationally, is running in such a way to maximise the sale price. Lawyers are far too often brought into the process too late but we can add real value and help structure the transaction. On sales, your advisers should be working with you to obtain the maximum sale price achievable for your company and through the legal documentation to ensure you are in the best position possible so as to minimise any potential claw backs on the sale proceeds either by way of warranty or indemnity claims or otherwise.
Q: And finally, any other advice?
A: Having previously worked in industry I use my experience and knowledge to work closely with companies working alongside my clients’ internal teams when buying and selling companies rather than being purely just an external legal advisor.
Lawyers can do more than just drafting documents, I have led and managed the due diligence and integration process and still continue to do so for some of my clients, this is a specific skill set due to my industry experience. Ask your lawyer whether they have commercial knowledge or experience in the sector or any industry experience?
Oh and try to have some fun along the way, buying and/or selling companies can be very time consuming and demanding, a good sense of humour at times can make the process more enjoyable for all!
With the right lawyer, a proper understanding of the scope and drivers, fixed fees and the ability to lead and manage the transaction and you will have a better chance of a hassle free deal.
Anna has clients based throughout the UK and is more than happy to discuss arrangements and innovative fee structures to suit each client separately.