M&A Insights – Are you ready for the new season?

August 3, 2016

Preparing a football team for next season isn’t so different to preparing a business for sale

The new football season is fast approaching. Conversations with clients, friends and colleagues turn to football transfers and thoughts on who might win the league.  Like many fans, I’m excited to see how my team will fare this year.

The message from the Premier League last year (and Portugal to a lesser extent at the recent European Championships) was that anything is possible. All you need is a team of decent (but not necessarily world class) footballers, great team morale, the will to win and more importantly – good preparation.

At Bluebox, we are currently getting businesses ready for a sale exercise in the Autumn and I’ve realised that there are four key similarities to football:

 

  1. Preparation is key

Football

  • Currently, it’s the frantic ‘pre-season’: playing matches all over the world to work on fitness, but more importantly build their ‘brand’ and increase their fan base.
  • Owners and directors are scouring the globe for hidden talent and negotiating the best deals.
  • Teams that succeed in the pre-season phase have benefitted from significant planning and consideration of all the avenues and opportunities available.

Corporate Finance

  • Similarly to my football club, many businesses taken to market are poorly prepared. They have suffered financial injuries and haven’t been active enough in their industry’s market.
  • Taking a business to market is often the most important decision in the professional lives of our clients, and yet it is easy to underestimate how much can – and should – be done in advance.
  • Maximising the probability of a successful outcome is ultimately heavily influenced by how strategic and watertight the pre-sale preparation is.

 

  1. Appealing to overseas investors

Football

  • The Premier League is incredibly wealthy, mainly due to the sale of domestic and foreign TV rights for £5.5bn and £3bn respectively over the next three years.
  • English clubs have always been attractive to overseas investors, and the weak pound is likely to increase that appeal. To put this into perspective, of the 20 Premier League clubs from last season, 14 had overseas shareholders!

Corporate Finance

  • Approximately 75% of our successful deals involve an international acquirer.
  • The UK remains an extremely attractive market with its highly-skilled workforce, relatively low tax rates and the lower pound boosting exports.
  • At Bluebox, we are expecting a significantly increased amount of overseas interest in the businesses we are taking to market in the Autumn.

 

  1. Buying wisely isn’t always about the price tag

Football

  • Leicester City won the league without any recognised world class players.
  • Conversely, the traditional “big four” clubs all made big money signings but that didn’t guarantee success.
  • Hidden gems such as last year’s player of the season, Riyad Mahrez, cost Leicester City just £400,000. N’Golo Konte cost them £5.6m, and has just been bought by Chelsea for £32m.

Corporate Finance

  • Similarly with the UK economy, there are a number of highly valuable and attractive UK assets such as the Chinese acquisition of ARM holdings for £24.3bn.
  • There are also many “Riyad Mahrez” type of businesses across the UK.
  • They are generally smaller, providing a niche service offering, valuable technology or other intellectual property. They typically lack the management, capital, sales and marketing infrastructure to realise their full potential.
  • Identifying the right strategic partner who can provide these resources and grow of the business is key – we call this the “Acqui-Hire” deal structure.
  • This involves the sale of a ‘minority’ stake in a business to a strategic acquirer that is able to provide the infrastructure and resources to assist with the development of the business.   The acquirer also commits to acquiring the remainder of the business over a period of years, based on its ongoing profitability, boosted by the new infrastructure in place.
  • Just as Leicester found Mahrez from the French second division and turned him into player of the year, there are plenty of overseas investors looking for rough diamonds to turn into hidden gems in the UK. This Acqui-Hire structure is particularly attractive to them.

 

  1. Timing

 

Football

  • Timing of a pre-season tour is crucial.  Start too early in the summer and the players are tired and not “match-fit” earlier into the season. Teams who have made this mistake lose ground quickly in the league.
  • With regards to player transfers, it is generally far better to sign players early in the summer to give the players time to get to know the team, systems and tactics so that they are ready to hit the ground running (literally) when the new season properly starts.

Corporate Finance

  • Planning for a future sale exercise works the same way.
  • It is essential to not rush the planning phase and make sure you have taken the time to consider all the catalysts that can increase the value of the business and therefore the chances of completing a deal.
  • As part of our Blue Diamond pre-sales planning programme, we work with businesses anywhere from 3 months to 3 years in advance of an exercise.  The longer you have to prepare, the better the outcome will be.

 

 

Get in touch if you’d like to discuss Bluebox, Blue Diamond…or even football.

 

Jonathan Rich

Associate Director

Jonathan.rich@blueboxcfg.com

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