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Merge, Acquire, Adjust: The Thrilling Yet Complex Dance of Performance Targets Imagine being at the center of a fast-paced, high-stakes dance - merging, acquiring, and adjusting, all while keeping an eye on the all-important performance targets. That's the game in the field of Non-GAAP adjustments in the context of Mergers and Acquisitions. These aren't just abstract concepts. They're real, tangible issues that affect companies' performance - and their ability to hit incentive plan targets. This isn't your run-of-the-mill topic. It's one that requires a keen understanding and a nuanced approach. Intrigued? Dying to know more about the nitty-gritty? Take a thrilling deep dive into the world of M&A and its impact on Non-GAAP adjustments. Here's your chance to explore how this elegant dance plays out in performance targets and results: https://lnkd.in/eRANFKQy Join the discussion. What's been your most complex M&A challenge? How did you overcome it?

The Carve-Out Trilemma, an excellent summary of best practice approach adopted by our lawyers and LPMs when it comes to managing inherently complex carve-out transactions.

DUE DILIGENCE IN MERGERS AND ACQUISITIONS Following the technological, social and political developmens, our world has now become smaller. Producers and Consumers can move between countries according to their needs in a very short time and easily, and this has accelerated company takeovers and acquisitions. This has revealed the need for Due Diligence to be carried out very meticulously. Due Diligence must first be carried out by competent and experienced team in this regard, otherwise, unreal asset/liability amounts of the merged/acquired company will be invested. The Due Diligence process iş given briefly below; 1. The legal structure of the company, whether the transactions are legal or not, commitments, etc. shold be examined in detail. 2. The company's existence of a transparent and healthy accounting system, authorisations and internal control mechanisms should be evaluated. 3. Whether taxes, public receivables and obligations to personnel have been fulfilled on time, and whether there are unpaid debts in this regard shoud be examined. 4. The trend in the market shares of the products over the years should be examined; is there outdated product group, how are price comparisons with competitor products over time? 5. In the company's financial statements, receivables & doubtful parts, the debts, the status of profit and equity capital and whether there are healthy figures, stock movement ratios, waste and losses should be examined and analyzed. Carefully carrying out all of the above-mentioned issues and any additional investigations that may arise during process will ensure that later disputes between the parties can be prevented from the very beginning. Ahmet Balta Certified Public Accountant

Business carve-out is complex and selling a business might turn out more difficult than buying and integrating one. 🤔 There is a fundamental strategic decision that the Board needs to take and agree that you are not the right owner of the business you are looking to carving-out, but once you decided to sell there are so many factors to focus on, as for example 📋 - Timing of divesting - Valuation 📈 - Sale process (i.e. auction, auction with selected parties or bilateral discussion?) - Financial structure and tax implications 💰 - Legal structure - Regulations 📜 - Sale process preparation - Operational separation (staff, systems, operations, contracts, TSAs, etc…) ⚙️ Management time absorption There are definitely some factors that matter more than others but experience matters here. I've been advising on business carve-outs for more than 10 years, and I check for these things: 1. Make sure you have the right amount of experience (legal, financial, business) to execute… independent professionals might be a good way to overcome experience issues… there are many very competent people in the market 2. Have your team and governance processes in place 3. Make sure your progress is discussed with frequence 4. Be flexible and open to react quickly when the sale process is going on What are your thoughts on the importance of focusing on the right factors during a carve-out? #BusinessStrategy #CarveOuts #BusinessRestructuring

Conducting various types of due diligence in mergers and acquisitions (M&A) is crucial for several reasons. 𝗜𝗱𝗲𝗻𝘁𝗶𝗳𝘆𝗶𝗻𝗴 𝗥𝗶𝘀𝗸𝘀 𝗮𝗻𝗱 𝗟𝗶𝗮𝗯𝗶𝗹𝗶𝘁𝗶𝗲𝘀 A financial, legal, and operational risks that could affect the value and future performance of the acquisition. 𝗩𝗲𝗿𝗶𝗳𝘆𝗶𝗻𝗴 𝗜𝗻𝗳𝗼𝗿𝗺𝗮𝘁𝗶𝗼𝗻 This verification process covers financial statements, customer contracts, employee agreements, and compliance with laws and regulations. 𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻 𝗔𝗰𝗰𝘂𝗿𝗮𝗰𝘆 Thorough due diligence aids in accurately valuing the target company. Understanding the company's true financial health, market position, and growth potential is essential for determining a fair purchase price. 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝗶𝗰 𝗔𝗹𝗶𝗴𝗻𝗺𝗲𝗻𝘁 It allows the acquiring company to assess how well the target aligns with its strategic goals. This includes evaluating the compatibility of business models, company cultures, and potential for synergy. 𝗥𝗲𝗴𝘂𝗹𝗮𝘁𝗼𝗿𝘆 𝗖𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲 Due diligence ensures that the acquisition complies with all relevant laws and regulations. This is particularly important in cross-border transactions, where multiple jurisdictions may be involved. 𝗣𝗿𝗲𝗽𝗮𝗿𝗶𝗻𝗴 𝗳𝗼𝗿 𝗜𝗻𝘁𝗲𝗴𝗿𝗮𝘁𝗶𝗼𝗻 The process helps in planning for the post-merger integration. Understanding the target company's operations, culture, and systems is vital for a smooth transition and realizing synergies. 𝗡𝗲𝗴𝗼𝘁𝗶𝗮𝘁𝗶𝗼𝗻 𝗟𝗲𝘃𝗲𝗿𝗮𝗴𝗲 The findings from due diligence can provide leverage in negotiations. Knowledge of the target company’s weaknesses or challenges can be used to negotiate a lower price or more favorable terms. -------------------- 📌Want to discuss with me about this or any other M&A topic? Simplify finance with infographics and real case models delivered each Saturday. Join 26.000 receiving our Newsletter: https://lnkd.in/dw-fNrYB `

“Due Dilligence” is SCARY stuff! Unless you have a sophisticated roadmap and the patience to work through it. There is another category of DD that has proven incredibly painful in M&A work, and it’s the combination of culture and tech. Merging the financial and IT systems, database integration, the customer/client and vendor integration, communication methodology and channels, hybrid leniency and variations, org chart overlap, and other “soft topics“ — that can turn the M&A process into a multiple year nightmare. DD needs to certainly take these things into account as part of the cost of doing business. Very large companies have driven themselves almost to failure by swallowing what they never considered chewing. Multiples of EBITDA/EV seldom tell the whole story of a need for a risk premium. Thanks for the thoughtful post, Bojan Radojicic.

M&A KPIs: The Right Merger and Acquisition KPIs and Metrics to Prevent Failure Every acquisition deal starts with an incredible amount of due diligence. Are the cultures and values compatible? Do the product lines and customer bases support each other? Do the numbers work and take us down a path of growth? Now, it's up to the newly-merged company to both preserve the current value of the organization and meet growth projections. It's a delicate balance.  KPIs should exist in the following four scorecard categories: Customers, Employees, Processes and Revenue.  Let's start with Processes: Processes KPIs System Conversion/Adoption: Systems are another area for redundancy after M&A. For example, if both companies didn't use the same accounting system before, they'll need to convert users. This can be a laborious process for all involved. It can impact productivity, employee health and even your cash flow. Measure system conversion and adoption rates to set clear expectations on when new systems should be up and running and by when. Actual v. Budget: Following due diligence and budgeting, everyone should have a clear picture of where they projected the new company to be on expenses, margins, profit, etc. Measure this closely and make adjustments quickly if your projections were off. M&A is filled with unknowns, especially in the area of expenses. Productivity/Efficiency: Productivity and efficiency measurements speak to the culture, systems and processes. Measuring productivity is a great gauge to tell if these areas are working well. If there is a breakdown in any of these, you will see it in your productivity. https://lnkd.in/d_HwuaBj

A carveout is the partial divestiture of a business unit in which a parent company sells a minority interest of a subsidiary to outside investors. Learn some interesting details and insights into effective carveouts: https://ow.ly/z5vl50RNWue #CFO #CFOs #Finance #Carveouts #Divestiture

Pillar Two Note 7: Euro 750 million Revenue Threshold Friends, as you know, Pillar Two Rules apply to MNE Groups with consolidated revenue of Euro 750 million or more. The determination of this threshold is critical as it establishes which MNE Groups will fall under the purview of the Pillar Two rules. The Pillar Two Commentary notes that the revenue threshold is based on the one that is used in the Country-by-Country Report rules. However, there are specific considerations to bear in mind when ascertaining the revenue threshold: The revenue threshold for Pillar Two is based on a four-year test. This test requires that an MNE Group's consolidated group revenue must exceed the threshold in at least two out of the four preceding fiscal years. Note that consolidated revenue for the current year (i.e., the tested fiscal year) is not factored into the four-year calculation. In case of newly formed entities, the revenue threshold is met if the MNE Group’s consolidated revenue exceeds Euro 750 million in the previous two years, irrespective of whether there are consolidated accounts for the previous four years. Special provisions are in place to address the implications of corporate restructurings, such as mergers or demergers, on the revenue test. The computation of the threshold can be intricate in these scenarios. For instance, in the event of a merger, the individual revenues of the merging MNE Groups for each fiscal year before the merger must be aggregated to determine if the combined revenue meets the threshold. Consequently, even if the individual MNE Groups did not meet the criteria for Pillar Two independently, the newly formed entity could be subject to the rules immediately following the merger. Additionally, the Administrative Guidance issued by the OECD Inclusive Framework in December 2023 clarified on treatment of certain items (e.g., realized and unrealized gains from investment activities, income or gain from extraordinary or non-recurring items) while computing the revenue threshold given the different approaches in financial reporting practices leading to lack of uniformity across countries in applying the threshold. In summary, the calculation of the Euro 750 million revenue threshold for Pillar Two Rules is a complex process that demands meticulous analysis. This is particularly relevant for MNE Groups that are approaching or have recently surpassed the Euro 750 million revenue mark. Jitendra Jain

Buy-side carve-out transactions add additional layers of complexity and opportunity. Check out the below article for carve-out transaction insights! #carveouts #DueDiligence #PrivateEquity #StrategicBuyers