To boost your business, you can try to increase your turnover and market share. That way you grow steadily ... but slowly. A bolder option is a company takeover. The risks are greater, but you expand faster. The experts are saying that now is the time for a takeover, but to avoid surprises be sure to get proper guidance.
Mathieu Luypaert, Professor of Corporate Finance at Vlerick Business School: ‘Takeover activity typically takes place in a wave movement. In a Belgian context, that wave started about five years ago, and peaked last year. However, we’ve recently seen this market stabilising due to financial markets characterised by uncertainty, mainly of a political nature, such as Brexit or the trade conflicts between China and the United States. At the same time, cash surpluses at investment companies are currently huge,
and that cash is of course ready to further finance acquisitions. Logically, you want to grow once the resources are available. If you see someone else growing, you want to grow too. In addition, the price sometimes gets pushed up in a bidding process, but the danger then is that the person who wins the bid pays too much.’
Expansion to other markets
Christine Vastenavondt is the General Manager of Memo, a medical reception contact centre she founded in Zele 25 years ago. The business now provides customer care by telephone for various sectors and is active throughout Flanders. Two years ago, Memo took over Offitel in Genk.
‘I had contacted the owner of Offitel at the time because they were serving a completely different niche in the market and we were actually very interested in adding that into the Memo group. But it wasn’t really the right moment and the idea was abandoned. Then in mid-2017 the people from Offitel called us themselves to ask if we had any interest in a takeover.’
An intricate process
A takeover is an intricate process that can take years, so you have to prepare thoroughly.
Nathalie Ponnet, Corporate Finance Advisor at VGD: ‘Christine informed us of her plans to acquire Offitel and we then requested the figures. Using those figures we analysed past profitability and then concluded that the price was too high. Four years later, the sellers approached Christine themselves, and the profitability turned out to be a lot better. A far higher turnover was being achieved.’
An expert has a rational perspective
‘During a takeover you’re very emotional,’ explains Christine. ‘It’s all bound up with your ambition, your money and the goal you’ve set yourself. So it’s very important to be guided by an external partner who is detached from the emotional side of things.’
‘We mainly look at the cash flow, and then we calculate the payback period,’ explains Nathalie. ‘If you can finance the acquisition with the cash from the acquired company over seven years, then that’s a reasonable period. The benefits of scaling up can already be felt by the call centre specialist: Memo is making major investments in the field of IT and technology. A perfect example is the GDPR legislation. Memo was completely up to date and compliant with GDPR, and we were able to apply this in full to Offitel with a minimum of time and effort, so that they too were ready.’
Technology and talent are central to takeover transactions. In a fast-changing world, a smart acquisition is the best way to stay competitive.
‘As a company you can grow organically, but taking over a business is a relatively quick way to grow,’ says Nathalie. ‘There are lots of strategic advantages too: you can sell your existing products in a new market, for instance, or sell your new products in an existing market. You can also avoid start-up costs. Of course this isn’t “business as usual” for an entrepreneur, but that shouldn’t put them off. They should make sure they have experts to steer the takeover process in the right direction for them.’
Do you have questions about acquisitions? Our advisors have drawn up a complete step-by-step plan for you, full of tips and tricks to help you get maximum growth from your takeover.
