Recent M&A studies show earn-outs appear in roughly 22 to 33 percent of private-company deals. The median performance period is twenty-four months, and the median earn-out represents about 43 percent of the total purchase price. Here is how to structure them so they work for you.

Subscribe now

Choose the Right Metric

Revenue is easier to measure and harder for a buyer to manipulate, which is why it now appears in about 62 percent of earn-outs. EBITDA metrics reward profitability but can be gamed through accounting choices. Pick the metric that best reflects what you control today.

Set Clear Definitions and Timelines

Define every term in plain English: what counts as revenue, how expenses are allocated, and what happens if the buyer changes the business model. Shorten the earn-out period to twelve or twenty-four months whenever possible. Longer periods increase uncertainty and buyer resistance.

Negotiate Buyer Obligations

Include a covenant that the buyer must operate the business in good faith and cannot take actions designed to reduce your earn-out. Require quarterly reports and an independent accountant to resolve disputes. These protections turn a vague promise into enforceable terms.

Limit the Downside

Cap your exposure by negotiating a floor on the base purchase price and making sure the earn-out is additional, not a replacement. Many owners also negotiate accelerated payment if the buyer sells the company again during the earn-out window.

Use Them Sparingly

Earn-outs work best when there is genuine disagreement about future growth. If the gap is small, a higher base price with a modest seller note often creates less friction. The goal is to get paid for the value you created without turning the next two years into a legal battle.

When structured thoughtfully, earn-outs become a tool that aligns interests instead of dividing them. They let you sell today at a fair price while still participating in tomorrow’s success.

I sit down with owners every week to map out exactly which structure makes the most sense for their situation. There is no charge for that first conversation. Reach out if you would like to talk through where your company stands today. Protecting your upside does not have to come at the cost of a clean close.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality

Recent reports show well-organized virtual data rooms can shorten due-diligence cycles by days or even weeks, with some deals closing a full twelve days faster. Here is exactly how to build one that works in your favor.

Subscribe now

Start Twelve to Eighteen Months Early

Do not wait for the first buyer call. Begin collecting documents now while you are still running the business. Create folders for financials, legal, operations, customers, employees, and intellectual property. The best rooms follow a standard M&A index so buyers know where to look.

Organize for Speed and Search

Use a professional virtual data room platform with full-text search, version control, and permission settings. Group documents logically: three years of audited financials first, then tax returns, contracts, customer lists, and employee agreements. Index every file so a buyer can type “customer concentration” and find the answer instantly.

Remove Friction and Red Flags

Redact personal information before uploading. Provide clean, normalized financials instead of raw QuickBooks exports. Include a separate “Q&A” folder for questions that come up during diligence. Buyers who find answers quickly stay excited and keep competing.

Control Access and Track Activity

Grant access in stages. Give financial buyers basic information first, then open more sensitive folders once you have a serious letter of intent. Most platforms show you exactly who is looking at what and how long they spend. That intelligence helps you anticipate their concerns.

Keep It Updated

Set a weekly routine to refresh numbers and add new contracts. Nothing kills momentum faster than a buyer pointing out outdated information. A living, breathing data room shows you run a tight ship.

A strong data room does more than save time. It removes doubt and lets buyers focus on the upside of your company instead of hunting for problems. The owners who treat this step seriously almost always see stronger offers.

I sit down with owners every week to map out strategic options and M&A strategies that make the most sense for their situation. There is no charge for that first conversation. Reach out if you would like to talk through where your company stands today. A few weeks of preparation here can change the entire trajectory of your sale.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality

This premium buy-side research is behind a paywall and it is worth it. This report is a long-form, data driven detailed analysis of Prudential Financial and why it offers a compelling value vs. its market peers.

Report includes:

• Overview and investment thesis

• Deep dive into Prudential’s business

• Industry analysis and Prudential’s competitive positioning

• Analysis of key financial metrics vs. peers (ROE, ABV, AUM, EPS, Dividends, Buybacks

• 4 Valuation Models Used: SOTP, DDM, Residual Income, P/ABV Comps

• Investment thesis and justification for price target

  DealFlow: Buy, Sell, Grow is a reader-supported publication. To access premium buy-side research, become a paid subscriber

Read more

Recent data shows stock sales make up only about 23 percent of M&A deals, especially in the middle market. Asset sales dominate because they let buyers leave unwanted liabilities behind. Here is how the two structures compare and when each makes sense.

Subscribe now

Tax Consequences for You as Seller

In a stock sale you pay capital-gains tax on the entire proceeds, usually at the long-term rate. In an asset sale the company itself is taxed first on the gain from each asset, then you are taxed again when the proceeds flow to you as a shareholder. That double tax can feel painful, but there are elections like 338(h)(10) that sometimes let you treat an asset sale as a stock sale for tax purposes. In my experience, knowing these elections early can save owners hundreds of thousands without changing the buyer’s structure preference.

Liabilities and Risk

Asset sales are cleaner for buyers because they pick only the assets and contracts they want and leave lawsuits, old debts, or employee claims with the selling entity. Stock sales transfer everything, which is why buyers demand bigger escrows and longer indemnification periods. If your company has clean books and few known risks, you have leverage to push for a stock deal.

Speed and Contract Transfers

Stock sales close faster because there is no need to reassign leases, customer contracts, or licenses one by one. Many contracts have change-of-control clauses that require consent. Asset sales trigger those consents and can add weeks or months. If speed matters more than tax savings, a stock structure can be worth the conversation.

When Buyers Push Hardest

Private-equity buyers and family offices are often more flexible on structure than corporate strategic buyers, who may need assets for integration reasons. In deals under $50 million, buyers frequently insist on asset purchases unless you have strong reasons otherwise. The key is to know your walk-away point before the letter of intent arrives.

How to Prepare Either Way

Review your contracts, leases, and licenses now. Get a preliminary tax analysis from your CPA showing the net after-tax difference between the two structures. That single page becomes powerful ammunition at the negotiating table. The earlier you run the numbers, the more options you keep open.

These two structures are not just legal details. They determine how much you actually take home and how smoothly the deal moves. Spend time on this decision before you start marketing, and you avoid the most common source of last-minute surprises.

I often sit down with owners to map out exactly which structure makes the most sense for their situation. There is no charge for that first conversation. Reach out if you would like to talk through where your company stands today. The right structure can easily add substantial sums to your net proceeds.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality

On March 19, 2026, the Federal Reserve, FDIC, and OCC took a major step toward reshaping U.S. banking regulation. In a coordinated set of proposals, the agencies outlined revisions to the U.S. Standardized Approach and an expanded risk-based approach for larger banks. The changes are explicitly designed to be more risk-sensitive and less punitive than the 2023 Basel III endgame proposal, particularly for traditional lending activities like residential mortgages and mortgage servicing. Overall, large banks could see capital requirements fall by approximately 4.8 percent, with midsize institutions benefiting from a 5.2 percent reduction and smaller banks up to 7.8 percent.

The driving rationale, as articulated by Fed officials and echoed in coverage including The Wall Street Journal, is to reverse the migration of mortgage origination, holding, and servicing out of the regulated banking system into nonbanks and GSEs. By making on-balance-sheet mortgage activity more capital-efficient, regulators hope to broaden participation, improve liquidity, and support housing access without compromising safety.

This article takes a deep dive into these proposals, with a sharp focus on the mortgage-specific provisions. It then compares them to the far more conservative Enterprise Regulatory Capital Framework that governs Fannie Mae and Freddie Mac. Finally, it explores the central hypothetical:

• What if FHFA rewrote the ERCF to mirror the new bank rules exactly?

• How much capital would each GSE actually need?

• How does that compare to their current GAAP net worth?

• And, assuming the senior preferred stock held by Treasury is deemed repaid through administrative or legislative action, how quickly could the Enterprises exit the seventeen-year-old conservatorship?

All figures are drawn from the GSEs’ official disclosures, the agencies’ March 19 proposals, and contemporaneous analyses. While no such alignment has been proposed or announced, the potential for it is a golden opportunity for FHFA (Fannie and Freddie’s regulator) to finally get the ball moving on returning these two financial giants to public markets.

Read more

The good news is that none of these levers require a complete overhaul. Most can be improved in the twelve to twenty-four months before you decide to sell. Here is exactly what buyers look for and how you can pull each lever in your favor.

Subscribe now

Lever 1: Recurring Revenue Streams

Buyers love predictability. A business with 60 percent or more of its revenue locked in through subscriptions, maintenance contracts, or long-term service agreements commands a noticeably higher multiple than one that starts from scratch every month.

In my experience, converting even a large portion of project-based revenue to recurring contracts can lift the valuation multiple by two turns or more. Recent M&A data on managed service providers and software businesses shows companies with strong recurring revenue routinely trade at 9–12 times EBITDA, while project-heavy peers clear only 5–6 times on the same profitability.

Start small. Look at your top customers and offer them an incentive to move to a quarterly or annual agreement. Document every renewal rate. Buyers will dig into those numbers during due diligence, and strong retention figures become one of your best selling points.

Lever 2: Diversifying Your Customer Base

Nothing scares a buyer faster than hearing that one client accounts for 30 percent or more of your revenue. They immediately picture what happens if that customer walks.

The fix is straightforward but takes time. Identify your largest clients and deliberately go after two or three new verticals or geographic markets. Reducing reliance on any single customer below 20 percent of revenue often changes how buyers perceive the risk of the business. Industry studies show that concentrations above 25 percent can trigger 15–35 percent valuation discounts or force buyers to demand earn-outs and heavier escrows.

Lever 3: Consistent EBITDA Growth

Buyers do not just look at your current profit level. They buy the trajectory. A company showing 15 percent compounded growth over the last three years will almost always trade at a higher multiple than one that is flat or erratic.

The key is to make the growth visible and repeatable. Track monthly EBITDA, cut obvious waste, and invest in the activities that drive the top line. I recommend owners build a simple rolling twelve-month view so trends jump off the page. When a buyer sees steady upward movement, they start imagining what they can do once they own it.

Lever 4: Improving Gross Margins

Buyers pay close attention to how much profit you keep on every dollar of revenue. Strong gross margins signal pricing power, efficient operations, and a product or service that customers value enough to pay for.

Review your cost of goods sold line by line. Can you renegotiate supplier contracts? Can you raise prices on your most loyal customers without losing them? Even modest margin improvements flow straight to the bottom line and can have an outsized effect on the multiple buyers are willing to pay. Recent SaaS and software transaction data shows companies pushing gross margins above 80 percent routinely command a 100 percent-plus premium to the market average.

Lever 5: Building a Strong, Independent Management Team

The moment a buyer realizes the owner is the business, the valuation drops. They do not want to buy a job; they want a scalable asset.

Start delegating key decisions now. Promote or hire people who can run day-to-day operations without you. Document their responsibilities and show a clear org chart. Buyers routinely pay a noticeable premium for businesses that can run without the owner on site. In my experience, the absence of a solid second-tier team is one of the fastest ways to see a 15–25 percent haircut in the final offer.

Lever 6: Cleaning Up and Normalizing Financials

Buyers hate surprises. Messy books, personal expenses mixed in with business ones, or missing records all create doubt and lower offers.

Spend the time to get your financials audited or at least reviewed by a CPA. Remove owner perks and normalize any one-time expenses so the true earning power shines through. I have seen owners add hundreds of thousands to their valuation simply by presenting clean, professional financial statements that a buyer can trust on day one.

Lever 7: Strengthening Your Competitive Moat

What keeps competitors from copying you tomorrow? It could be proprietary technology, a unique process, exclusive contracts, or even a powerful brand in your niche.

Take inventory of what truly sets you apart and protect it. File the patent, lock in the key supplier agreement, or build the customer loyalty program that competitors cannot match overnight. Buyers consistently pay more for businesses with a genuine, defensible edge. The stronger that moat, the less risk they see and the higher the multiple they offer.

These seven levers work together. Pull two or three of them hard and you will see the valuation move. Pull all seven and you position your company to attract the best buyers and the strongest offers.

If you are even thinking about a sale in the next few years, the smartest move is to start on these improvements now. The earlier you begin, the more time you have to let the results compound.

I sit down with owners every week to map out exactly which levers make the most sense for their situation. Reach out if you would like to talk through where your company stands today. There is no charge for that first introductory meeting. The difference between an average exit and a life-changing one often comes down to these seven numbers.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality

What if a single transaction could dismantle the entrenched duopoly in U.S. payments processing, generate billions in synergies, and elevate a regional player to national prominence—while navigating intense antitrust review and investor skepticism? That was the core proposition of Capital One’s $35.3 billion all-stock acquisition of Discover Financial Services, unveiled in February 2024 and consummated on May 18, 2025, following a protracted regulatory process. As of March 2026, with one year of integrated operations, the results are unfolding: robust revenue growth and stabilizing credit quality, tempered by persistent ROE declines and integration costs exceeding initial estimates.

Building on my prior analysis of Cisco’s $28 billion acquisition of Splunk, where understated projections potentially left significant value untapped, this examination dissects the Capital One-Discover transaction for deal professionals and enthusiasts. We will detail the strategic rationale, trace the negotiation chronology, analyze the valuation framework in depth, evaluate its assumptions, review regulatory challenges, compare to analogous deals, assess post-merger outcomes, and extract key insights.

Strategic Rationale: Capital One’s Push for Scale and Independence in a Competitive Landscape

In consumer finance, where data analytics and network control drive margins, acquisitions are essential for maintaining competitiveness. Capital One, established in 1994 as a credit analytics specialist, had amassed $482 billion in assets through targeted lending products like the Venture rewards card and retail partnerships. However, by 2023, it faced pressures including elevated delinquencies in subprime segments, competition from FinTechs such as Affirm, and substantial fees paid to Visa and Mastercard for transaction processing.

Discover, with $143 billion in assets, offered a complementary profile: a focus on prime borrowers, a proprietary payment network processing 4% of U.S. card volume and extending to over 200 countries through Diners Club and PULSE, and a strong debit business. Despite these strengths, Discover contended with operational issues, including a 2023 card misclassification incident resulting in a $365 million charge and FDIC enforcement actions, alongside a CEO transition that pressured its stock.

The deal’s value proposition centered on vertical integration. Capital One anticipated $2.7 billion in pre-tax synergies by 2027, comprising $1.5 billion in cost reductions from eliminating overlaps in technology, branches, and operations, and $1.2 billion in revenue enhancements from internal debit routing, which could reduce interchange fees by 20-30%. Beyond efficiencies, the merger enabled cross-selling of premium products to Discover’s 100 million customers, advanced AI applications in lending, and broadened merchant networks to 70 million acceptance points. Following closure, Capital One shifted toward higher-end segments, reducing subprime exposure to emulate American Express’s model while enhancing fraud prevention through aggregated data.

“Critics are wary of the size of the deal, but some analysts say it could create a stronger challenger to Visa and Mastercard.” - Bloomberg

Challenges were evident: Potential cultural mismatches between Capital One’s agile culture and Discover’s established systems risked employee attrition, with 1,100 Discover positions eliminated by March 2026. Technology migrations posed outage risks, and antitrust concerns over the combined 30% subprime market share necessitated a $265 billion community benefits commitment, which critics argued overstated new investments at under $5 billion according to organizations like the National Community Reinvestment Coalition. Nevertheless, the merger promised to chip away at Visa and Mastercard’s over 80% market control, potentially lowering merchant costs over time.

One year post-closure, performance indicators show progress amid headwinds. Third-quarter 2025 revenues increased 23% year-over-year to $15.4 billion, bolstered by Discover’s assets, with organic purchase volumes rising 6.5%. Credit trends improved, with domestic card net charge-offs at 5.04% and delinquencies at 3.93% in early 2026. However, integration expenses exceeded projections, contributing to a $4.3 billion net loss in Q2 2025 from acquisition-related accounting, including $510 million in quarterly intangible amortization. Return on equity fell to 9.63%, below the sector average of 9.78%, leading to analyst downgrades such as Seeking Alpha’s Strong Sell rating, which forecasts an 11.6% downside to a $160.90 fair value due to efficiency shortfalls.

Negotiation Chronology: Mapping the Path from Initial Outreach to Regulatory Approval

Large-scale mergers require meticulous orchestration, often spanning months of discussions, assessments, and adjustments. Similar to the Splunk-Cisco process (initial engagement in 2021 leading to closure in 2023), the Capital One-Discover timeline involved strategic pauses and escalations and complexities.

The groundwork predated 2023, with both companies periodically evaluating growth opportunities amid rising interest rates, fintech competition, and regulatory pressures. Discover maintained independence but entertained advisor contacts following its July 2023 misclassification issue, which incurred a $365 million liability and prompted an FDIC consent order.

The process accelerated in August 2023: Discover’s CEO resigned on August 14, causing a stock decline. Chairman Thomas Maheras received inquiries, including from Stephen Crawford, an advisor to Capital One CEO Richard Fairbank, around mid-August. This led to a September 13 meeting in New York, where Fairbank proposed a stock-for-stock transaction at a 30% premium. Capital One had engaged Centerview Partners and Wachtell, Lipton, Rosen & Katz by mid-August.

In December 2023, the merger discussions between Capital One and Discover hit a significant roadblock when Capital One’s due diligence uncovered critical red flags related to Discover’s compliance and credit risk management. Key issues included a long-standing card product misclassification dating back to 2007, where certain credit card accounts were incorrectly placed in higher merchant pricing tiers, resulting in ongoing merchant settlement discussions, regulatory scrutiny, and an SEC investigation. Discover had already recognized approximately $290 million in estimated penalties as of September 30, 2024, tied to a 2023 FDIC consent order mandating enhancements to consumer compliance, governance, and risk practices. Additionally, concerns arose over the adequacy of Discover’s compliance management system and credit risk framework, which Capital One deemed insufficient for alignment with its standards and regulatory expectations. These findings prompted Capital One’s management to inform Discover on December 7 that it would not proceed, citing the diligence status and external factors like Discover’s rising stock price, which would necessitate a higher exchange ratio.

The temporary halt, reviewed and affirmed by Capital One’s board on December 14, highlighted the potential for substantial remediation costs—estimated within the overall $2.8 billion in acquisition and integration expenses, including one-time fixes for Discover’s issues—and raised uncertainties around regulatory approvals, operational integration, and financial synergies. This pause delayed the process by several weeks, allowing time to assess whether the risks outweighed the benefits, but discussions resumed in January 2024 after market shifts and further evaluations, ultimately leading to the deal’s revival and completion.

Valuation Framework: A Detailed Examination of Projections, Dividend Discount Model, and Comparable Transactions

Valuations in this transaction were based on structured analyses by financial advisors Centerview Partners (for Capital One) and PJT Partners (for Discover). These relied on unaudited management projections, emphasizing conservatism amid economic uncertainty. The analyses incorporated standalone forecasts for both companies, adjusted for synergies, and excluded certain one-time items like Discover’s student loan portfolio disposition (implied NPV of ~$7.25 per share, excluded due to uncertainty). Below, we break down the key components into management projections, the dividend discount model (used as a proxy for DCF), and market comparables.

Management Projections: Building Blocks of Standalone and Synergized Forecasts

The unaudited prospective financial information formed the core inputs, derived from consensus estimates (e.g., from FactSet or street research) for near-term years (2024-2025) and extrapolated for longer horizons (up to 2030, varying by advisor). These projections included net income available to common shareholders (NIAT), earnings per share (EPS), return on average tangible common equity (ROATCE), tangible book value per share (P/TBV), risk-weighted assets (RWAs), total loans, and total capital returns (e.g., dividends and buybacks). Assumptions reflected steady growth amid economic headwinds, with Capital One targeting CET1 ratios of 13% and Discover 12% for capital adequacy. Synergies were layered on top: $2.7 billion pre-tax by 2027

• For Capital One standalone (Centerview’s view, 2024-2030; extrapolated with ~1% NIAT growth in 2026 and ~3% thereafter; RWAs ~3.5% annual growth from 2026)

• PJT’s Capital One standalone projections (2024-2028; NIAT growth 13% in 2025, 7% thereafter; loans/RWAs ~5% annual growth from 2025; capital returns at 68% payout ratio)

• For Discover standalone (Centerview’s view, 2024-2030; NIAT growth ~8% in 2026, 5% in 2027, 11% in 2028-2029, 4% in 2030; RWAs ~3% in 2026, 5% thereafter; 2024 includes student loan sale impact)

• PJT’s Discover standalone projections (2024-2028; NIAT growth ~10% annual average; loans/RWAs ~7-8% growth)

Dividend Discount Model: Discounting Future Cash Flows to Present Value

The primary valuation method was a dividend discount model (DDM), serving as a proxy for discounted cash flow (DCF) tailored to the banking sector. DDM was preferred over traditional DCF because banks’ cash flows are heavily constrained by regulatory capital requirements (e.g., Basel III and CET1 ratios), making free cash flow unpredictable and less relevant—leverage and capital structure are integral to operations, not separable as in non-financial firms. Instead, DDM focuses on distributable dividends (excess cash after maintaining capital buffers), providing a more accurate reflection of shareholder value in a regulated environment where dividends are stable and tied to risk management. This approach aligns with financial institutions’ unique dynamics, where working capital and capex have minimal impact, and earnings are often directed toward reserves rather than unrestricted FCF.

Centerview and PJT applied sensitivities to growth, discounts, and terminals, yielding implied per-share ranges for Discover. Centerview’s DDM (2024-2030 forecasts; discount rates 12.75-13.75% via CAPM: 4% risk-free, 1.4-1.5 beta, 5-6% equity risk premium; terminal P/E 8.5-10.5x on 2030 NIAT; perpetual growth implied ~2-4% in sensitivities): Implied Discover value $120.50-$141.75 per share (standalone), adjusting for synergies to support the exchange ratio (0.88-1.23x ex-synergies, 1.06-1.75x incl.).

PJT’s DDM (2024-2028 forecasts; discount rates 11-13%; terminal P/E 8.5-10.5x on 2028 NIAT): Implied Discover value $117.46-$145 per share.

Market Comparables: Benchmarking Against Peers and Precedents

Comparables analyses supplemented DDM, using selected public companies for multiples and precedent transactions for premiums. Peers were chosen for similarity in consumer finance/banking (e.g., focus on cards, lending).

These supported the deal’s premium as aligned with market norms, though critics noted limited fintech inclusion.Centerview’s comparable companies: P/E (9-11x 2024E EPS) and P/TBV (1.78-2.11x via ROATCE regression) for peers like American Express, Ally Financial, Synchrony Financial. Implied Discover ranges: $107.75-$130 (P/E), $103.25-$121 (P/TBV).

PJT’s similar: P/E 9-11x, P/TBV 1.78-2.11x, yielding overlapping ranges.

Premiums paid: 10-35% applied to Discover’s unaffected $110.49 price (February 16, 2024 close), implying $121.50-$149.25 per share.

Precedent transactions (selected banking deals) informed the range but were not detailed with specific multiples.

Reviewing the P/E comparables we see overlap with the sensitivity analysis and a rough triangulation approach on the final deal value at a roughly 10.5x P/E. This represented a 27% premium to Discover’s market value at the time of the deal.

Scrutinizing the Valuation: Assessing Assumptions and Potential Enhancements

The 27% premium appeared reasonable given Discover’s challenges, but parallels Splunk-Cisco’s conservative approach, where growth projections may have understated potential. NIAT forecasts (3-11% for Discover) overlooked opportunities in network globalization or AI enhancements. Discount rates (11-13.75%) were elevated; reducing to 10-12% might increase per-share value by $10-20.

Comparables were appropriate but limited; incorporating fintech benchmarks like SoFi (12-15x P/E) could justify higher multiples. The premiums range was expansive; a 20-30% banking median aligns with the deal’s 27%, yet deeper precedent transactions (e.g., Synchrony-Ally alignments) were underemphasized. Without alternative scenarios (e.g., 5-7% perpetual growth if synergies surpass $2.7 billion), Discover may have conceded $5-10 billion. Analyst views diverge: BTIG’s post-closure Buy rating cites $21.39 EPS potential, while others highlight ROE shortfalls, estimating fair value at $161.

Navigating Regulatory Hurdles: The Beltway Battles That Shaped the Outcome

Regulatory approval in banking mergers extends beyond financials to public policy. Antitrust concerns over subprime concentration attracted Department of Justice criticism, with groups like the American Economic Liberties Project deeming it anticompetitive and predicting fee hikes. Capital One rebutted by emphasizing network competition, though detractors questioned the efficacy of claimed efficiencies.

The process: Applications filed March 2024; July public hearings; extensions under Biden-era stringency. A post-election administrative change in April 2025 expedited Federal Reserve and OCC approvals, alongside Delaware clearance in December 2024. The $265 billion benefits package (focused on low- to moderate-income lending and branch expansions) was promoted as transformative but critiqued for minimal incremental value.

“Regulators have been tough on big financial mergers, though there are nuances in Capital One’s $35.3 billion takeover bid for Discover.” - New York Times

Benchmarking Against Peers: Contextualizing the Deal in Banking’s Consolidation Wave

To evaluate Capital One-Discover, consider it alongside 2025’s heightened M&A activity (over 150 announcements, with October’s $21.4 billion marking the peak since 2019). Comparisons include Fifth Third-Comerica, Huntington-Cadence, PNC-BBVA (2021 benchmark), and cross-sector to Splunk-Cisco.

Fifth Third’s $10.9 billion all-stock Comerica deal (announced October 6, 2025; expected Q1 2026 close) aimed for regional dominance, yielding a $288 billion entity with leading positions in the Midwest and Texas. The 1.8663 exchange ratio provided a 20% premium to Comerica’s 10-day VWAP ($82.88 implied). Synergies: $850 million gross pre-tax (35% of Comerica’s 2026 expenses), with revenue opportunities in payments and wealth. Timeline: Comerica explored options in summer 2025 amid liquidity issues; CEO contact September 18; Dallas meeting September 19; nonbinding indication September 23; finalization through September 30; execution October 5. Advisors mirrored Capital One’s (Goldman Sachs, J.P. Morgan). Valuations: Conservative DCF/comps supported fairness, with risks in integration and enhanced regulatory category. Unlike Capital One’s network focus, this emphasized footprint expansion, with milder antitrust but comparable community commitments.

Huntington’s $7.4 billion Cadence acquisition (mid-2025 announcement) created a $276 billion top-10 bank via Sunbelt growth and deposit diversification. Valuation: 1.5x tangible book value premium; synergies $800 million (30% cost reductions). Shorter timeline (6 months to close) leveraged regulatory easing. Early 2026 data indicates 15% EPS accretion but initial ROE pressure—echoing Capital One’s trajectory with less subprime exposure.

PNC’s $11.6 billion cash purchase of BBVA USA (announced November 2020; closed June 2021) offers historical perspective: 1.34x TBV and 19.7x 2019 earnings, with $900 million synergies (35% of BBVA expenses) forming a $560 billion national player. Integration overruns ($980 million expenses) delayed benefits, akin to Capital One’s cost escalations. Outcomes: 21% 2022 EPS lift, though the $88 billion benefits plan faced scrutiny—similar to Capital One’s. PNC achieved >19% IRR, illustrating long-term rewards despite early hurdles.

Post-Merger Assessment: Progress, Pain Points, and Forward Outlook

Retrospective analysis highlights resilience: Q3 2025 revenues rose 23%, with synergies advancing (e.g., debit routing implemented early 2026). Yet, Q2’s $4.3 billion loss, cost overruns, and subprime portfolio adjustments underscore challenges. Capital returns via $16 billion buybacks and dividend increases supported shares, but ROE declines indicate ongoing inefficiencies. Credit trends reflect normalization, with charge-offs steady and reserves easing.

“The Discover acquisition drove double-digit growth, but organic card spending and loans also expanded.” - PYMNTS

“[integration costs] will surpass the original $2.8 billion estimate.” - Capital One CEO Richard Fairbank stated during the Q2 2025 earnings call

The company added that it’s still on track for $2.7 billion in total net synergies, due to cost savings and revenue synergies from the combination. But it seems this is taking far longer to achieve than originally anticipated.

Key Insights and Implications: Synthesizing Lessons for Future Transactions

The Capital One-Discover merger exemplifies M&A’s capacity to transform sectors: a calculated integration of networks and data that navigated negotiations, valuations, and regulations to yield a payments contender. It demonstrates how deals emerge (opportunistic timing during vulnerabilities), valuations are constructed (through layered projections and sensitivities), and improvements can be made (by incorporating upside cases to maximize outcomes).

For dealmakers, the takeaways are pragmatic: Align pursuits with market lows for favorable premiums; integrate diligence pauses as risk mitigators; broaden comparables to include emerging peers; and prepare for regulatory variability, where shifts can compress timelines. In banking’s ongoing consolidation, this transaction signals opportunities in tech-enabled scale but warns of execution risks. Conservative assumptions can protect against downside, but can deprive shareholders of real value.

Subscribe now

1. OpenAI acquires IO Products for $6.5 billion

The first one jumped off the front pages of most business news publications. OpenAI, the leading AI research and deployment company known for ChatGPT acquired IO Products for $6.5 billion. IO Products is the AI hardware and devices startup co-founded by former Apple chief design officer Jony Ive (the famed designer behind the iPhone)

The deal is an all-equity transaction and is OpenAI's largest acquisition to date. Strategically, this positions OpenAI to expand into physical AI hardware. With this deal, OpenAI acquires 55 hardware experts that are among the industry’s best. I find OpenAI’s hardware ambitions fascinating and am keen to see what kinds of products they develop.

2. Alfa Laval acquires Fives Cryogenics for $939 million

Alfa Laval, a Swedish industrial company specializing in heat transfer, separation, and fluid handling technologies, acquired the cryogenics business unit from Fives Group for $939 million. Fives Group is a French industrial engineering firm focused on process technologies and equipment.

The heat exchangers and pumps developed by Fives Energy Cryogenics are essential for the efficient liquefaction, regasification, and transportation of gases like LNG and hydrogen, as well as industrial gases such as carbon dioxide and nitrogen. In fact, Fives Energy Cryogenics is a world leader in this domain, with 65 years of experience designing and manufacturing cryogenic heat exchangers and pumps for gas liquefaction.

"This acquisition is a strategic milestone for Alfa Laval. By integrating Fives Energy Cryogenics' cutting-edge cryogenic technology to our portfolio, we are not only extending our technological capabilities but also reinforcing our commitment to driving the energy transition. This acquisition positions us at the forefront of innovation in important future markets, enabling sustainable volume growth and value creation" - Tom Erixon, CEO and President of Alfa Laval.

3. Perenco acquires Woodside Energy’s Trinidad assets for $206 million

The energy industry continues to light up in terms of dealmaking (even the previous Alfa Laval deal is related to LNG transport). Perenco, an Anglo-French independent oil and gas company with E&P operations in multiple regions, has acquired select assets from Woodside Energy for $206 million. Woodside is an Australian energy firm engaged in liquefied natural gas (LNG) and oil production. The deal involves Woodside's interests in the Greater Angostura and Ruby shallow water oil and gas fields offshore Trinidad and Tobago.

The deal will combine Perenco’s newly acquired assets with their existing operations in the Teak, Samaan and Poui (“TSP”) and Cashima, Amherstia, Flamboyant and Immortelle (“CAFI”) fields. This will make Perenco as a major oil and gas producer in the country, responsible for roughly 12% of the total production with a gas production base of >500 mmscfd and oil production >10,000 bpd.

“This acquisition is an exciting, promising addition to Perenco’s acreage in Trinidad and Tobago. It shows our continued commitment and ambition towards developing energy resources and contributing towards the country’s economic growth. This milestone will increase our gross production levels in excess of 100,000 boepd and allows us to further strengthen our partnership with the Government of Trinidad & Tobago. We are confident that our specific skill in mature field assets and marginal resources will secure long-lasting production from the Angostura asset, while prioritizing the safety of our people and environmental sustainability. We are pleased to welcome our new colleagues to the Perenco family and would like to recognize all the players who contributed towards the success of this acquisition. I would like to thank the Ministry of Energy and Energy Industries and all the people at Perenco and Woodside who worked diligently to make the short transition period a success.”

4. Quanterix acquires Akoya Biosciences for $69 million

Quanterix, a US company fueling scientific discovery through ultra-sensitive biomarker detection has acquired Akoya Biosciences, a spatial biology firm offering single-cell imaging solutions. Quanterix’ technology is used to quantify proteins at low levels in blood, serum or plasma. Akoya’s imaging solutions enable researchers to phenotype cells with spatial context and visualize disease progression and therapy response. The deal will establish Quanterix as a scaled leader in early detection of disease for neurology, oncology and immunology markets in blood and tissue. This expands Quanterix’ total addressable market to $5 billion, and enable cross-selling with Akoya’s installed base.

The deal terms were initially announced as an all-stock transaction for $286 million in January 2025. But this was amended downwards in April 2025 amid market concerns. The deal is a cash and equity transaction, with $20 million in cash and the remaining $49 million in equity. Qunaterix will target $40 million in annual cost synergies post-transaction. The final terms of the deal will see Quanterix shareholders own 84% of the combined entity.

“The acquisition of Akoya positions us to deliver comprehensive protein biomarker solutions that leverage signatures in blood and tissue, together providing a more holistic and predictive view of a patient’s disease. This transaction extends our portfolio into new markets and is expected to expand our served addressable market from $1 billion to $5 billion. We believe the combined business will benefit from significant scale, a strong balance sheet and an accelerated path to profitability by 2026” - Masoud Toloue, CEO of Quanterix

5. Sanoh Industrials acquires Winkelmann Powertrain for $13.9 million

Another area I have noticed increased M&A activity has been in automotive suppliers, and I come back to this area for the final deal of this article. Sanoh Industrial Co., Ltd., a Japanese automotive parts manufacturer specializing in tubes, pipes for vehicles, has acquired Winkelmann Powertrain, a Mexican company producing powertrain components for the automotive industry.

The deal is part of Sanoh’s “Last Man Standing Strategy” which aims to secure Sanoh as the #1 global market share leader in automotive tubing. By integrating Winkelmann’s Powertrain business as a subsidiary of Sanoh, they will establish a dominant position in fuel injection for vehicles made in Mexico for the US market. The deal is a big bet on continued demand for ICE vehicles and the slower than anticipated adoption of EV’s in the US market.

About the author: Stephen McNamara is a Sr. M&A Advisor with ONEtoONE Corporate Finance, an international investment banking and mid-market M&A advisory group with offices in 30+ countries. Contact details are in the “Contact” section of DealFlow: Buy, Sell, Grow.

The M&A Advisory team you select will play a significant role in the amount of value created in the deal. An exceptional advisor:

• Asks “Why”?: An exceptional advisor asks “Why” to continuously validate assumptions, eliminate wasted effort, explore new deal options, and sustain deal focus.

• Understands your business: The M&A advisor must have an empirical view of current and future industry trends, enabling technologies and interdependent industries that significantly increases the value ceiling. As a result, they will develop an optimal set of investment candidates for each client.

• Spearfishes: An exceptional investment advisor will find those investors and companies that most value a specific client’s offering. Great advisors use structured frameworks to build a well-defined target profile, the advisor will quickly identify ideal matches for each client.

• Leverages global reach and local insight: A good advisor will leverage an expansive global investor network that connects multiple industries. An effective advisor will leverage access to trusted M&A colleagues with a deep understanding of financial markets, industries, and companies in each region of the world. This allows them to open discussions with new investors and corporate networks that promise to hold a most significant interest in the deal.

• Takes business, personally: A good advisor is continuously mindful that M&A success depends on people to embrace and support implementation – before and after the deal. They know that business is personal and that its most significant value asset must be supported, nurtured, and challenged.

Choose an investment advisor who also possesses the five qualities mentioned above. If you do, you will capture exceptional value in your deal.

Why are so many M&A Advisors poorly rated?

Being an M&A advisor is not an easy task. We have just talked about the characteristics that a good advisor must have to be hired for your company’s transactions. But it is normal for a business owner who thinks about selling his company to be afraid of hiring advisors.

It is a crucial decision, there is a lot on the line, and many things are going through his head: “Are they going to fight for my best interest? Do they have a large enough contact base to sell this? What if the charge me a lot of money, make us work, play around and then nothing happens?”.

It is true, a lot of “advisors” do not do practical work. They are good at documentation, valuations, analysis, etc. But they do not know how to locate the right buyer; they do not have the technical and human resources needed, so they cannot spend the necessary time to find the right buyer. That is why, regardless of their efforts and excellent skills, they fail to sell your company and let you down.

“Our experience in dealing with more than 2000 mandates has shown that 70% of the outcome of a business sale is based on an extraordinary amount of work on the buyer search and contacting of the key decision-makers. That is an intensive and heavy workload that cannot be done by a small team or a single advisor; the reality is that without a strong support system, they will not be able to do it”.

-Enrique Quemada, Chairman of ONEtoONE Corporate Finance

If this is your company and is the most critical transaction of its history, you deserve an elite team working to maximize the transaction sale value. If you want to sell your company, make sure that the advisor you choose can provide you with this level of search capabilities to find your buyer and beware of the buyer who attacks your advisor.

If you sell a business, be warned that buyers know that advisors play a very relevant role for the seller, and some will try to bypass them and speak directly to the company owner.

“Once the conditions for the contract and a deadline to sign the SPA had been set, the buyer asked to have a personal meeting along with our client. The buyer asked for a 30% payment deferral in the meeting, and our client agreed. The next time we met with him, he told us what had happened. When we asked him what guarantees they had given him for this payment, he did not answer. He had not gone into detail with the buyer, and he soon realized what a mistake he had made not having his advisors with him when making concessions”.

In some cases, a buyer tries to gain the client’s trust and encourages him to forget about his advisors, insisting that things will be smoother if they speak one-on-one. Don’t fall into this trap - they are likely thinking they can negotiate with a less experienced person to get a better price.

How can the advisor help his client?

When a business owner asks for advice on his company’s future, the advisor faces two types of clients: those who want to sell their business but do not know-how, and the ones who should sell their company but do not know it yet. What both business owners have in common are significant reasons to sell their businesses. These reasons tend to be:

• The proximity of retirement.

• It is unable to keep up with competitors.

• Lack of sufficient resources to implement the latest developments in his sector.

• Personal reasons such as health issues, being tired after years of hard work or the desire of spending more time with family and loved ones.

For an excellent professional dedicated to clients’ advice, such as a lawyer or a financial advisor, it is vitally essential to advise and guide him towards the best possible decision.

At ONEtoONE, we are a firm specialized in M&A that supports our clients throughout the entire sales process. We offer a 100% specialized service to maximize its value and thus create interest and competition for it. We achieve this thanks to our international team of financial and sectorial experts. Our cutting-edge technology has allowed us to develop a proprietary methodology and developed our proprietary methods.

We guarantee the clients that we will always comply with our three pillars during the sales process: methodology, competence, and transparency. ONEtoONE applies its values and methods in all its services: sale and purchase of companies; mergers, business valuations, investor search, strategic financial advice, and financial advice.

ONEtoONE Corporate Finance is a global investment banking group with 200+ M&A Advisory specialists in over 30 countries and 50+ cities worldwide. They have advised on over 2000 successful M&A transactions, with >70% being cross-border deals.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality.

Subscribe now

Deal size over $1 billion

I would be remiss if I didn’t mention Nippon Steel’s acquisition of US Steel for $14.9 billion. This marks the end of a truly bruising and highly political takeover process. US Steel has struggled with high costs for years, and Nippon’s offer to takeover the company with a promise of new investment into the firm was first proposed in 2023. But of course, US Steel is considered a “strategic asset” with national security concerns and the politics heated up quickly. President Biden effectively blocked the transaction and US-based bidders dropped out. President Trump managed to approve the deal under strict conditions that leave the US Government with control over the US Steel entity via a “golden share” agreement.

“[The golden share grants] the right to appoint an independent director…and Consent rights of the President of the United States, or his designee, on specific matters” - Reuters

If I had to guess, the US Steel saga is far from over. It may lie dormant for awhile, but with the President now able to appoint someone to the Board and have an effective veto over “certain matters”, it is only a matter of time before the politics heats up once more. It is unclear if Nippon, or the US Government, will come to regret this acquisition in the long-run.

Deal size $500 million to $1 billion

For motorcycle enthusiasts, a major M&A announcement: India based Bajaj Auto will acquire Austria’s KTM for $924 million. KTM is an Austrian motorcycle manufacturer struggling with a financial debt restructuring that was threatening to send the firm into insolvency and liquidation. Production facilities in Austria had already been halted, the company was in the courts trying to get a restructuring plan approved - and the deadline was end of May 2025. Bajaj has stepped in, just in time, with the first 200 million Euro installment as part of a larger court-approved rescue. The remaining funds are now approved and on the way (loans plus convertible bonds), with Bajaj gaining majority control over the company. The deal will build on their longtime partnership with KTM and further expand their presence in high-end performance motorcycles. As a condition of the deal, Austrian jobs will be preserved.

“The most important thing in all decisions is the successful future of KTM and the long-term safeguarding of jobs.” - CEO of KTM

Deal size $100 million to $500 million

In an all Singapore affair, Alliance Energy Services has acquired PEC Energy for $165 million. Alliance Energy is part of Liberty Energy Solutions Ltd, which provides energy engineering solutions and proprietary equipment / products to oil and gas refineries and petrochemical facilities globally. PEC is a Singapore based provider of maintenance and integrated EPC services for the oil and gas, petrochemical, chemical and pharmaceutical industries. The deal will expand Alliance / Liberty’s range of services and customer base, mostly in Asia and Middle East markets. Interestingly, Liberty is owned by Private Equity firm ShawKwei & Partners, which specializes in industrial service companies with revenues between $50-$800 million USD. ShawKwei focuses on acquisitions in the industrials and industrial services sectors with expertise in performance improvement / turnaround situations.

“We are excited to welcome PEC into Liberty Energy…PEC’s strong management team, technical expertise, and reputation for reliability and service excellence align well with our strategy of building a global platform for best-in-class energy solutions.”
- Kyle Shaw, Chair of Liberty Energy

Deal size $50 million to $100 million

There were only 4 identified deals in this size range last week. The most interesting was Colt CZ Group’s acquisition of Steel Stamp Inc for $59.5 million. Colt is based in the Czech Republic, and is a global manufacturer of firearms. They have manufacturing hubs in the their home country as well as the USA, Canada, Sweden, Switzerland and Hungary. Steel Stamp is a US based maker of firearm components and has been a long-term supplier to Colt CZ Group. The deal represents a 5x EBITDA multiple of the company’s firearms business.

“The strategic rationale for the transaction is to achieve vertical integration in selected product categories. With this acquisition, Colt CZ Group gains control of a reputable, high-quality precision machining company, that serves as a key supplier of revolver frames, cylinders, spare parts, and other firearm components for the commercial market,” - Radek Musil, CEO of Colt CZ Group

Deal size under $50 million

We remain in the wider defense space - lots of M&A action going on - for the “under $50 million” category this week. UK based Gooch & Housego, a manufacturer of photonics components and systems, acquired US based Global Photonics for $17.5 million. Global Photonics is a manufacturer of optical systems military land applications, as well as for aerospace and industrial sectors. The deal extends Gooch & Housego’s presence as a supplier to the US defense sector, as well as builds their US based manufacturing presence.

I think that defense sector M&A has been heating and am fully expecting more deals to come.

However, they should not be considered a long-term solution. The most important word is “Transitional”. These agreements should be temporary, and a guiding principle of carve-outs should be to avoid TSA’s whenever possible. Where they can not be avoided, they should be as brief as possible. In this way, they enable (rather than delaying) the carved-out business to become fully independent. Below are the top-5 questions about TSA’s for those involved in a carve-out situation.

What is a Transitional Service Agreement (TSA) in a Carve-Out?

A Transitional Service Agreement is a temporary contract between the parent company and the carved-out entity, detailing services the parent will provide post-separation to ensure operational continuity. These services, like IT, HR, or logistics, typically last 6–24 months while the new entity builds its own systems. TSAs are vital because carve-outs often leave the new entity dependent on the parent’s infrastructure, and without a TSA, operations could stall. A major objective of all carve-out projects is to ensure “Day-1 Readiness” of the carved-out business. That means the new business should be able to run as independently as possible on Day-1 after the carve-out is completed.

All TSA agreements should specifically detail service scope, duration, costs, and performance standards to prevent disputes and ensure a smooth transition. When the carve-out is in connection with a divestiture (i.e. the carved-out business is being acquired by a new owner), it is the new owner that should determine whether a TSA is truly needed.

The above example covers IT services post carve-out. But the same principle applies to a range of possible services. For instance, logistics, warehousing, marketing, payroll systems etc. These are all common areas for TSA’s. In the case of a company acquiring the carved-out business, they should ask which processes can be absorbed into their existing systems and processes. Good post-merger integration programs can mitigate the need for longer TSA’s.

What Are the Key Components of a TSA?

A TSA typically includes four key components: scope of services, duration, pricing, and performance metrics. The scope defines what services the parent will provide, such as IT or accounting support. Duration sets the timeline, often with extension options. Pricing outlines costs, which may be fixed or variable, ensuring transparency. Performance metrics, like service-level agreements (SLAs), hold the parent accountable for quality and timeliness [Note: I’ll cover SLA’s in a subsequent article]. These components create a clear roadmap, preventing misunderstandings and ensuring both parties know their responsibilities, like a detailed playbook for a smooth handoff.

What Are the Challenges of Implementing a TSA?

Implementing a TSA can be challenging due to misaligned incentives, unclear terms, or operational complexities. The parent may prioritize its own operations, leading to subpar service for the new entity. Vague terms can cause disputes over costs or quality, while complex operations may strain the parent’s resources. To address these, both parties must negotiate clear terms, align incentives, and monitor performance closely, like refereeing a game to ensure fair play. And this is before the most crucial challenge of all: time. It takes time to negotiate a TSA. Think of the specificity involved and stakeholder alignment needed. If the carve-out is in connection with an M&A transaction then the TSA terms could even impact the valuation and price being paid. If the parent company is not providing sufficient flexibility on TSA’s, the acquiring company may abandon the deal entirely. This is why it is critical to have an advisor that has done this before. They’ll understand the time needed, stakeholders required and address potential risks early on while they can still be handled “easily”.

How Long Do TSAs Typically Last, and Can They Be Extended?

TSAs typically last 6–24 months, depending on the complexity of the carve-out and the new entity’s readiness to operate independently. The duration is set to balance the need for support with the goal of the new entity becoming self-sufficient. However, as a general principle they should be for the minimum required duration so as not to delay true “Day-1 readiness”. For complex systems and services, it is often the case that TSA’s have to be extended. But beware that any negotiation for an extension will happen after the carve-out or M&A transaction has closed. The former parent company may be unsympathetic to potential disruptions because the new company is not ready by the end of the initial TSA. That is why extensions often come with renegotiated terms and considerably higher costs. Clear exit strategies and milestones in the TSA help both parties plan for a smooth end to the agreement, like setting a finish line for a relay race.

TSA’s are inevitable for any complex carve-out, providing a lifeline for the new entity as it gains independence. For companies navigating carve-outs, a well-crafted TSA is like a bridge over turbulent waters—essential for reaching the other side intact.

The most important message I can give for those tasked with executing a carve-out, or businesses contemplating a carve-out is this: Carve-outs are hard, and you need an advisor that has done it before. The vast majority of companies have no internal expertise with this kind of project. This is not their fault, carve-outs are highly specialized activities and businesses don’t do them very often.

I am available for interim carve-out advisory engagements. If interested, please contact me at stephen.mcnamara@onetoonecf.com for an introductory discussion.

Exclusivity is giving a single advisor – or a single advisory firm – exclusive control over the negotiation, the search for potential buyers, and the overall process of selling a company.

Within the world of commercial sell-side and buy-side advisory, there are different types of advisors. You can find either Brokers or Professional Advisors.

Brokers

A broker is a person you hire to sell your business in exchange for a percentage of your business. In this case, you will not give any exclusivity and the process will not be confidential. The broker will spread the word that your company is being sold because that is what you have commissioned them to do, and very quickly the whole market will know about it.

You may even think that by having more than one broker you will get more and better offers, but this is a serious mistake. Two brokers may claim that they have found the buyer, creating an unresolvable conflict.

The broker is in charge of indiscriminately launching the sale offer to the market. They look for a buyer, and they will find one, but not necessarily the best one or the one who can pay the most for your company. It is in the broker’s interest that the transaction proceeds as quickly as possible so they can collect their percentage.

“Remember that a Broker will look after their profit more than yours”

Professional Advisors (Sell-Side and Buy Side)

Professional Advisors bring enormous added value that directly benefits you in the sale of your company. They carry out a properly planned, organized, and structured operation from start to finish, with confidentiality assured.

Granting them exclusivity means that they contact not the first buyer that comes along, but those who are interested in buying your company and can pay the best price, while assuring you that they can afford to pay. A professional advisor has the necessary knowledge to recommend to you not to sell at a certain moment if they believe that the offer is insufficient and that they can obtain a higher price.

Their mission is to protect the business owner and prevent the possible loss of value of the company during the sale process, which can happen if the sale process is disclosed indiscriminately. A professional Advisor will ensure complete confidentiality, as this can have a positive impact on the final sale price.

Likewise, an Advisor will not contact anyone you do not want them to. A broker cannot guarantee that, as their offer is indiscriminate.

A Professional Advisor will always try to get the best price for the sale of your company, even if that means waiting for the right offer”

The importance of confidentiality in the sale of a company

As we have said, granting exclusivity to an advisory firm has a major benefit for you: it guarantees confidentiality. But why is confidentiality so important? For the simple reason that if word gets out that the company is being sold, it could reduce its value. This will hurt the final sale price. You may also not want your competitors to know about the sale of your company.

If you do not grant exclusivity you cannot enjoy confidentiality. You can not expect several brokers to compete to find a buyer and at the same time do so confidentially.

Ensure the confidentiality of your advisory team by signing a Non-Disclosure Agreement (NDA).

The benefits and value of having an advisor in the sale of your business

Once you have contracted a firm specializing in the sale of businesses, they will assign a team of between four and six people to the sale of your company. This team could be bigger if the process is carried out at an international level and the firm utilizes offices in different countries.

Once the sales process gets underway, this is where you will see the value of giving exclusivity to an advisor and the time and resources they dedicate to:

• Carry out a company analysis.

• Prepare documentation: information memorandums, blind teasers…

• Carry out a company valuation.

• Conduct a database and market analysis.

• Find companies across the world that could have synergies with yours. This involves analyzing their financial statements and past acquisitions.

• Discard those that don’t fit: Determine the decision-makers in those corporations and find their contact details, a job that takes hundreds of hours.

• Contacts: The heads of businesses interested in purchasing your company are contacted. The opportunity is explained to them and they are sent all the necessary documentation: blind teaser, NDA and Information Memorandum.

• Negotiation: Here begin the requests for a host of information about your company in all different formats, a cross-checking of data, meetings, and visits that can last for weeks and culminate in an Indicative Offer. This process is repeated depending on the number of companies being dealt with.

After all of this, the advisory team will have committed more than 1000 hours of work across analysts, managers, database teams, search teams, directors, and partners. And at least 50% of the work remains until the transaction closes. The sales process can take time and the end of the operation comes with the closing of the transaction.

Professional advice on the sale of your company

A professional firm specializing in sell-side and buy-side advisory, with trained and experienced advisors, cannot take on the project of selling your company and making such an investment into it without a reasonable expectation of getting paid for it.

“For your professional advisor, your profit on the sale of your company is their profit. Their incentive is that the more you earn, the more they earn”

To ensure this optimal outcome, all serious advisors require a period of exclusivity. In return, they will work with the tireless commitment of their teams of experts in accounting, finance, negotiation, strategy, legal, and tax, including advisors across international offices.

All this dedication deserves your loyalty to your advisors in return. Your relationship with them should be based on trust and transparency. They will work exclusively for you so that you get the maximum benefit. 90% of their remuneration will come from the closing of the transaction. Therefore, maintaining a relationship of trust and reciprocity until the closing of the sale is vital, both for your interests and theirs.

Avoid risks by giving exclusivity to an advisor who specializes in sell-side and buy-side advisory

If you are considering the sale of your company, the best option is to give exclusivity to an advisor with real experience and work with them professionally.

They will help you prepare the company for sale, and decide on the best way to approach and which candidates to contact. They will devise the best strategy for your interests:

• Taking the process seriously.

• Preparing robust documentation.

• Valuing the company.

• Identifying which companies would fit as buyers.

• Finding the ones that can pay the most.

Giving exclusivity to an advisor who works for you as part of your team, and has a commitment on both sides, prevents you from making mistakes. It also substantially increases the chances of selling the company and getting you a much higher price.

“Only professional advisors can create a competitive process and negotiate the different offers for the sale of your company, guaranteeing you the best result”

When you start the process of selling your company, you may encounter brokers who will tell you that they can work with you on a non-exclusive, success-only basis and that you will only pay them if they succeed in selling the company. This is a serious risk. This type of broker will work only to close the deal at whatever price, as quickly as possible.

You will sell your company only once. Turn that transaction into a reward for a lifetime of job and wealth creation. You only need patience and the best professional advice.

ONEtoONE Corporate Finance is a global investment banking group with 200+ M&A Advisory specialists in over 30 countries and 50+ cities worldwide. They have advised on over 2000 successful M&A transactions, with >70% being cross-border deals.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality.

This was the second major announcement about Fannie Mae and Freddie Mac in the last two weeks, and investors should take note of the change in tone. In the first announcement, President Trump said “I am giving very serious consideration to brining Fannie Mae and Freddie Mac public…and will be making a decision in the near future”. Now note the above post: “I am working on taking these amazing companies public”. In other words - President Trump’s decision has been made and the conservatorships will end on his watch (i.e. by the end of 2028). I didn’t expect my previous analysis to get validated so quickly, but I’ll take it.

Now the major questions become (1) What needs to happen to achieve President Trump’s objectives? and (2) How much are Fannie Mae and Freddie Mac worth?

I’ll address these questions in reverse order, with this article focusing on updating my price targets. I build on my prior content and cover valuation methodology (including a review of Pershing Square’s methodology), shareholder dilution and my price targets for Fannie Mae and Freddie Mac. The details are behind a paywall (paid subscribers can continue reading). Suffice to say, the shares are up ~600% in the last 12 months and I think they still have massive upside potential. Free subscribers should consider upgrading to paid for this one - the potential upside on these stocks is huge. It might be the single best investing decision you’ll make.

Read more

Subscribe now

Deal size >$1 billion

There was only one deal over $1 billion that closed last week. And it is technically a stretch, as the deal was for $600 million and another $1.3 billion pending certain performance milestones related to clinical development. I’m referring to Sanofi’s acquisition of DREN 0201, in a $1.9 billion acquisition (per the terms above). The deal is for a drug in clinical development that would boost Sanofi’s immunology portfolio. DREN 0201 (now rebranded SAR448501) targets immune related diseases such as Lupus and, as you can tell by the name, is still in clinical development. Dren Bio (the parent company that developed DREN 0201) will continue to operate as an independent entity, and use the proceeds to further develop their pipeline of antibody therapeutics.

Deal size $500 million to $1 billion

n/a. There were no deals in this size range that closed last week. Its the first time this has happened since I started writing my M&A news section. What can I say…maybe the holidays did have an outsized impact on the M&A markets.

Deal size $100 million to $500 million

I have to admit that I don’t typically follow the crypto / bitcoin news that much. But the following deal caught my interest. Ursalpha Digital Ltd, registered in the Virgin Islands acquired Cango for $352 million. Cango is a Chinese firm headquartered in Shanghai (though listed on the NYSE) that originally specialized in car financing. In November 2024 (7 months ago), Cango pivoted to Bitcoin mining with a major acquisition of crypto mining equipment (all of which was outside of China, as cryptocurrency mining is illegal there). They, in effect, exited their original car financing business to focus on crypto. Ursalpha Digital is a subsidiary of Bitmain, one of the largest Chinese cryptocurrency miner companies, again based outside of China for legal reasons. With this acquisition, Cango will exit its legacy car financing business entirely as well as the Chinese market entirely. They intend to relocate their headquarters outside of mainland China though no location has been announced yet. Originally, I thought this might be a form of capital flight from China, but that does not seem to be the case here. Rather it is a strategic pivot into Bitcoin mining that has invited the dealmaking spirits.

Deal size $50 million to $100 million

For deals in this size category, we go to the world of luxury watch retailing with The Hour Glass Ltd. (a Singapore based luxury watch retail group) buying THGrau (Australia) for $58 million. The deal took some research to unpack, as technically THGrau is a Australia based Special Purpose Vehicle with limited disclosures. However, it seems THGrau was a holding entity for prime retail locations, and the acquisition could significantly expand The Hour Glass group’s retail locations in the country. This could be good for fans of Rolex, Patek Philppe and Hublot brand watches known to be sold by The Hour Glass group.

Deal size <$50 million

Once again, dealmaking in this size category was sparse and of the deals identified only two were cross-border transactions. The most curious one was Taiwan based WW Holding’s acquisition of Vietnam based Virtue King for $3 million. WW Holding is a specialized manufacturer of luxury, sports and luggage bags. It owns 4 subsidiaries: Wilson Bag (focused on luxury, business and sports bags), Wellpower (focused on sports equipment / protection gear and medical protection gear), TWT (specialized in luggage and business bags) and now Virtue King which is specialized in Golf bags. WW Holding’s strategy since 2009 has been focused on expanding their manufacturing footprint in Southeast Asia, and this acquisition of Virtue King (including their Vietnam based manufacturing facilities) fits squarely with this approach.

That is it for the week. As I said before, dealmaking was pretty sparse this week. Hopefully there is more action in the week ahead. To me the most interesting deal this week was the Cango / Bitcoin deal. I don’t typically pay much attention to the crypto world, but it sure is interesting to see an established car-financing company abandon their legacy business, pivot to crypto and then leave their country of origin as a result (all within 7 months).

This section of DealFlow is dedicated to the topic of carve-outs and how to execute them. I won’t cover an entire carve-out in one article. Rather I will do small articles covering specific topics. Individually they will seem “incomplete”, but together I hope they emerge as a valuable resource to those tasked with executing the most complicated project a business can do.

The most important message I can give for those tasked with executing a carve-out, or businesses contemplating a carve-out is this: Carve-outs are hard, and you need an advisor that has done it before. The vast majority of companies have no internal expertise with this kind of project. This is not their fault, carve-outs are highly specialized activities and businesses don’t do them very often.

I am available for interim carve-out advisory engagements. If interested, please contact me at stephen.mcnamara@onetoonecf.com for an introductory discussion.

Subscribe now

Question 1: At what level will the carve-out occur?

The very first step in defining the carve-out concept is to define the status quo and carve-out objectives. While this seems obvious, it can actually be harder than it seems. Sometimes the Executive Board has not fully aligned on what is to be carved-out. In many cases, the parent company has been built up over so many “bolt-on” acquisitions that nobody actually knows what the company’s legal entity structure even looks like. Key questions include: what specifically do we want to carve-out?

Here is an illustrative example based on my own experience. Imagine a conglomerate with multiple Business Segments organized at industry level. Within each Segment are several Business Units, either based on a Product Category or Region. Within each Unit are Local Operating Entities. The Executive Board decided to try divesting individual Business Units. That meant the a corporate transformation program designed to make each Business Unit as “independent” as possible. This was the starting point for the carve-out concept as it defined the level at which the carve-out would occur.

Question 2: What is the main objective of the carve-out?

This question is simple to answer at a high level. The main objective of a carve-out is to ensure the business being separated can operate independently on “Day-1” and be seamlessly transferred to new owners. Even if the objective does not involve divesting the business, having the option of “easily” doing so is a clear benefit of carve-outs.

Question 3: What are the major interdependencies that need to be dealt with?

This section is “high level”. I’ll do individual deep dives in later posts for each of the major interdependencies listed.

Once the decision has been taken to carve-out a specific business, the question becomes “where to begin?”. The very first thing management teams should do (aside from get experienced advisors in place) is to assess major interdependencies. Specialized teams of advisors will be formed around these categories as they will require significant time and expertise. In general, there are 6 major categories (others will emerge in the project, but these are “the big six”).

1. Shared Processes: shared services and process interdependencies bewteen corporate entities. Once identified, assign what should happen to each (e.g. get absorbed by buyer, discontinued, Transitional Service Agreement (TSA) etc.)

2. Shared People: related to the first category, headcounts / FTE’s are often shared across legal entities. They need to be identified in order to give management an idea of how many people may need “special attention” (e.g. workers’ council alignments, union considerations, employee choice about whether they want to stay with the parent vs. carved-out business etc.)

3. Sites and Locations: Large businesses have offices and facilities around the world. They all need to be listed with clear assignments. Those that are dedicated to the unit to be carved-out are easy. In cases where facilities are shared between entities to be separated, individual plans need to be developed. These often have to consider local requirements (e.g. permitting, licenses, registrations etc.)

4. Intangible Assets: Depending on the business, patents and trademarks may be shared across entities being separated. These can often drive significant value for both. Careful attention to how these will be allocated during the carve-out is needed

5. Contracts: Businesses often have hundreds of thousands of contracts. A dedicated team will have to review each one and look for things like “change of control clauses”, customer notification requirements etc. Customers will also have questions about how their contract is impacted the moment a carve-out is announced. The contracts team will need to work closely with the communications team.

6. Systems: Shared IT systems and corporate applications are usually more numerous than you think. Moreover, they take specialized know-how to deal with during a carve-out. Systems needs a specialized team and is often the biggest and most complex part of the carve-out. For example, imagine you are splitting 40+ legal entities (not uncommon for big companies doing carve-outs). That is 40+ new payroll systems that will have to be established, in flawless coordination with multiple departments to ensure there is no payroll disruptions.

   ---

   Carve-outs are hard, and you need an advisor that has done it before. If you are considering a carve-out and looking for a potential advisor then please contact me. I am available for interim carve-out engagements.

   My email: stephen.mcnamara@onetoonecf.com

   DealFlow: Buy, Sell, Grow is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

These are undoubtedly the most frequently asked questions in our meetings with clients: How much does it cost to sell my company? How much does an advisor receive from the purchase/sale of my company? The answer is a classic and can be summarized in two words: it depends.

The first thing to understand is that many professionals will be needed to properly sell a company. Financial Advisors (M&A Advisors), Lawyers, Tax Advisors (not the same as financial advisors), Notaries are all crucial figures - and they all charge for their services. When you decide to sell your company professionally, you will have to ask them about their fees individually.

Your first contact will be the Financial or M&A Advisor who will accompany you through the entire process of selling your company. In general, they charge two types of fees: Fixed Fees and Success Fees.

Fixed Fees or Retainers

Fixed fees or retainers are charged regardless of the outcome of the process. They are commonly associated with documentation delivery or with the achievement of specific landmarks during the sale process. It is not uncommon for the advisor to offer to deduct these fixed fees from the success fees. The truth is that they usually only represent a tiny part of the total costs in the event of deal closure. However, they are still a cost that the business owner must “advance”.

The controversy around fixed fees is their relevance, that is, should I pay them or not? This doubt arises because some advisors work only on a success-fee basis. There is a proverb that says: “What does not cost is not valued” or “You get what you pay for”.

When a business owner starts the process without spending a penny, they have not embraced the sale of the company and they will always be tempted to pull out at any time. Also, a business owner who does not trust their advisor will think that if they have not made the right choice of advisor, at least they have not spent any money. Perhaps the business owner has repeatedly heard cases of friends, saying “They charged me and did nothing”, or perhaps they have already experienced it themselves. While we cannot guarantee that this will not happen, most of the time this lack of professionalism occurs when the transaction has been put into the hands of people who do not work exclusively in this profession. Some excellent professionals will dedicate many hours to the sale of your company. Ask your lawyer, your tax advisor, a competitor who has already sold, or search on the internet for reference. Even if you believe that you have found an advisor in your first meeting, try to obtain a few different proposals and compare them. Remember that you are only going to sell your company once.

Let us go back to the option of not paying fixed fees, but now lets look from the advisor’s perspective. Not having an initial fee in the process swill also affect the advisor and could generate a conflict of interest in the long run, as they may want to close a deal at any cost and without considering whether the chosen buyer is the best option for their client. This would, in part, be due to the advisor’s fear of not closing the transaction and thus not obtaining any fee (if everything is dependent on success), despite having given away time and work.

But what is fair? This is a question that has no easy answer, especially for very different firms (e.g. one with $5 million in revenues vs. $500 million). Every company has different peculiarities and complexities. But what we can say is that at ONEtoONE, each project, no matter how small will have at least two people working on it and could have up to ten. Think about the cost of a senior employee in your company and the hours that they will dedicate each month to a project, and you will have a very rough idea of the price range for fixed fees.

Success Fees

These fees are understood and accepted by all clients. Their name says it all; they are obtained upon the completion of a project, whether that is selling or buying a company that you have been looking for.

However, they can also be complex to calculate. In the sale of a company, the norm is to pay a percentage of the company’s agreed value, since the higher the price achieved, the greater the reward for both the client and the advisor. And what is the percentage rate applied? Again, this is difficult to answer, but there is at least a commonly accepted rule: the rate will be inversely proportional to the transaction size; that is, higher percentages will be incurred in smaller transactions, and lower rates will be incurred in larger transactions.

Do not get carried away by what a friend who has read in a newspaper about a large transaction tells you. Again, different companies have different circumstances. The purchase/sale of a family company is not governed by the figures of Nasdaq-listed companies. The risk of selling, or rather not selling, a small or medium-sized family business is much greater than in large multinationals. For greater risk, there is a higher cost. The range of rates is very wide for family companies and usually goes from 1% for large transactions to 6% for small transactions, based on the transaction value.

Make sure you demand that the rate applied to your transaction is justified. To avoid surprises, grab a calculator and with an estimated value of your company, do the calculations to avoid scares or misunderstandings in the future.

ONEtoONE Corporate Finance is a global investment banking group with 200+ M&A Advisory specialists in over 30 countries and 50+ cities worldwide. They have advised on over 2000 successful M&A transactions, with >70% being cross-border deals.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality.

Yet these companies have been in under government conservatorship for 17 years (a consequence of the Great Financial Crisis in 2007-2009). As a result, they trade Over-The-Counter, lost among the wilderness of penny stocks. President Trump came to office in 2016 with the aim of ending their government conservatorship and restoring them to private market glory. But he ran short of time as the companies had virtually no capital on their books, and needed years to build this up. Their penny stock status remained. In 2020, the Biden administration had no interest in dealing with the future of these firms. The upshot: Fannie Mae and Freddie Mac continued to build capital…lots of it…and almost nobody was paying attention. I wrote my first buy-side research article on these firms back in January. These were deep dive reports covering the detailed histories, financials and valuations of the companies. I asserted that as they continued to build capital, the probability of exiting conservatorship increased and so to did the anticipated share values.

Trump returned to office with these companies in a much stronger position than in his first term. Then, last week, President Trump posted that he was seriously thinking of ending the conservatorships. This single message sent the shares up >50% in one day !

With this single post, President Trump has massively increased the odds that the conservatorships will end before he leaves office in 2028.

So I think this is a great time to revisit my previous deep dive on Fannie Mae ($FNMA) and Freddie Mac ($FMCC), including my valuation models and price targets. I will do this in two parts. The first part (this post) will cover why I think both companies can accumulate enough capital via retained earnings alone to exit conservatorship. This is a critical achievement, as it means additional shareholder dilution (in excess of the outstanding government warrants) is less likely. In Part 2, I will review my valuation model and price targets and comment on the price target from Pershing Square (Bill Ackman’s hedge fund). The details are behind a paywall (paid subscribers can continue reading). Suffice to say, the shares are up ~600% in the last 12 months and I think they still have massive upside potential. Free subscribers should consider upgrading to paid for this one - the potential upside on these stocks is huge. It might be the single best investing decision you’ll make.

Read more

Subscribe now

Deal size >$1 billion

Our first deal is an all American affair. PepsiCo has acquired VNGR Beverage for $1.95 billion. VNGR is the company that owns Poppi Prebiotic Soda, a brand of soda beverages that emphasizes sodas made with prebiotics, fruit juices and apple cider vinegar. In other words, with way less sugar and an appeal to wellness oriented consumers. The company itself was only founded in 2015, and it even appeared on a pitch for Shark Tank. As consumer preferences have shifted, Pepsi has undertaken a strategic portfolio transformation program. The deal will see Pepsi improve its product portfolio offerings, while significantly boosting Poppi’s growth potential.

"Poppi represents a compelling strategic fit within our short- and long-term vision for the future of beverages…Its rapid growth, strong consumer engagement, and differentiated functional positioning make it a dynamic addition to our portfolio. We are excited to scale poppi's momentum and unlock new growth through our capabilities – we're just getting started." - Ram Krishnan, CEO of PepsiCo Beverages U.S.

The deal terms are also interesting, and includes $300 million of cash tax benefits for PepsiCo as well as a performance-based earnout contingent on Poppi obtaining certain performance metrics.

Deal size $500 million to $1 billion

Deals in this size range were few and far between this week. In fact, I could only identify 2 globally that closed in the last week (I exclude rumored or announced M&A). For the most interesting of the two, we turn to Asia. SG (“Sagawa”) Holdings, the leading Japanese freight and logistics company has acquired Morrison Express, the Taiwan based global freight forwarder for $900 million. Morrison Express is renowned for its expertise in semiconductor and high-tech logistics. The deal significantly expands SG’s presence in Asia and further allows it to offer end-to-end supply chain solutions across air, ocean, rail and road freight. The combined entity will also benefit from their combined global networks. For those interested in understanding how semiconductors and high-tech products are physically moved around the world, this is a deal worth watching.

"Morrison Express' established relationships within the technology sector and strong Asian market presence, combined with their expertise in semiconductor logistics, perfectly complements our existing capabilities and forward-thinking approach to supply chain management…The acquisition will significantly enhance global network coverage, allowing the SG Holdings Group to provide better logistics solutions across different regions” - Bokuto Yamauchi, Head of Global Strategy for SG Holdings

Deal size $100 million to $500 million

For this deal size category we return to the United States. Alumis, a US based autoimmune disease therapeutics company, has acquired Acelyrin, a late-stage clinical bio-pharma company for $242 million. Interestingly, the deal terms will see Alumis and Acelyrin shareholders own 55% and 45% of the combined company after close. The deal happened over the objection of Trium Capital, which owned 5.4% of Acelyrin, who argued that the deal terms were worse for shareholders than simply liquidating the company.

“We believe all the offers received by [Acelyrin] thus far are inferior to a winding down of the company and returning capital to shareholders…A liquidation of the company provides certainty of value well above the value from any of the offers. We believe there is no reason for shareholders to accept any transaction that provides upfront value less than value that can be expected in a liquidation” - Trium Capital, letter to shareholders on April 28 2025

“This merger represents the culmination of a thorough strategic review process by our Board and management team to determine the best and most value-maximizing path forward for ACELYRIN. We are confident that Alumis is the right partner to optimize the development of lonigutamab and together deliver long-term stockholder value.” - Bruce Cozadd, Chairman of the Board for Acelyrin

I always find it interesting when there are significant differences in views. In this case, a major shareholder disagreed with the deal terms but did not convince enough shareholders to vote against the deal. I guess we’ll have to wait and see who turns out to be correct.

Deal size $50 million to $100 million

In the UK, Anima Care has acquired CVS’ crematoria operations for $56.4 million. Anima Care is part of Funecap Group, a major European funeral services provider, and provides end-of-life care and funeral services for pets. Interestingly, Anima Care made an unsolicited bid for CVS’ Crematoria business which had 2024 revenues of roughly $16 million and adj. EBITDA of $5.8 million. The transaction values the business at ~10x EBITDA. A post-closing service agreement will see Anima Care continue to provide clinical waste disposal and cremation services to CVS practices going forward. The deal is a typical “bolt-on” acquisition for Anima’s core business, while allowing CVS to focus on its core offerings.

“This disposal reflects our commitment to focusing on our core veterinary services while ensuring quality end-to-end services for our clients. The capital generated will support our strategic expansion and deliver value to the Group.” - Richard Fairman, CEO of CVS

Deal size <$50 million

Our last deal of the week, though smaller in size is no less interesting or significant. China’s leadership in battery and new vehicle technology is on clear display. Hubei Wanrun, a leading Chinese battery manufacturer, has acquired Safra, France’s only domestic producer of hydrogen fuel-cell buses for $7.8 million. Safra has been in receivership since Febraury and the deal had to be approved by France’s courts. As part of the deal, Wanrun will retain 120 of 169 Safra employees, and they are planning to continue construction of hydrogen buses as well as renovating trains and subways to convert diesel coaches to hydrogen fuel cells. While the deal was approved by the judge, it was opposed by the workers’ unions, the State Economic, Social and Environmental Council as well as multiple elected officials. According to them, Wanrun’s terms remain vague and it seems there is not a lot of trust - even if 120 jobs are being preserved and Wanrun is a top manufacturer. They seem to be worried that this deal will allow Wanrun to flood the EU market with their products. But taken from another perspective, it could be a valuable way to get highly competitive and innovative technology into the EU market. Expect more deals like this in the future.

"We have a lot of questions because Wanrun's offer is vague; we don't know what they're going to do" - Ludovic Vialard, CGT union representative.

"Wanrun manufactures electric buses in China, but not hydrogen-powered ones…it will send nearly finished buses to Safra, which will provide the necessary certifications to flood the European market." - Laure Malleviale, departmental secretary of the Tarn CGT union. "

That is it for the week. Personally, I think the smallest deal (Wanrun’s acquisition of Safra) is the most interesting. I’m expecting a lot more cross-border M&A from Chinese firms acquiring EU firms in the automotive technology sector.

The time frame required to sell a business depends on the complexity of the operation, and in turn the size and circumstances of the company to be sold. Generally speaking, the sale of a company takes 9 to 12 months, but can take longer (18+ months) for more complicated situations. For instance, I was involved in the carve-out of a global industrials business from its parent conglomerate. The company being carved-out was heavily integrated in many of its global locations to other parts of the conglomerate, and getting it fully carve-out was a two year process.

In any company acquisition or sale transaction, time is money. Maximizing the value of your company during the sale will, in no small way, be determined by knowing where your time and money is in the selling process.

Why does it take so long to sell a company?

There are several reasons that justify the investment of time in this operation. If you want to realize a sale with all the value obtained in a long life of wealth creation, the first and best strategic decision is to invest in hiring specialized advisors.

Selling a business is a complex process. For the seller, it can be the most crucial decision of their life. Considering that it is a process that they will go through only once in their life (in most cases), it is normal that the preparation for this decision brings time for reflection and analysis. The seller can make errors of judgment forced by emergencies, such as health problems. Even in that case, having a trusted advisor allows you to face your personal reality with the peace of mind of knowing that your company’s sale is in good hands, without having to accept the first offer presented to you. A good advisor can also help you identify the best time to sell your company.

If the company also has several shareholders, imagine the time it takes to reach an agreement between all of them about the sale’s objectives.

The buyer needs to check and ensure that the value of his purchase is real. When it comes to investing money, rushing is not best practice and preparing the necessary documentation that reflects the real value of a company requires time and professionalism.

Finally, from the point of view of the process itself, all this time is required to maximize the company’s value and carry out the unavoidable phases of a sale and purchase transaction, with all the necessary documentation and negotiations

Doing all this while ensuring that the company does not lose value during the sale process is not an easy task.

And here another question comes as a surprise: can my company lose value during all that time? The answer is, sadly, yes. The sale is a very long process, and if the seller dedicates themself exclusively to this process, they may lose contact with the company. That makes its results decrease and, therefore, its value. As an entrepreneur, the time you dedicate exclusively to the sale of the company will reduce its value and the possibility of profiting from the sale.

The best way to spend your time as an entrepreneur during the sale of your company is to dedicate yourself to it until the process is complete. It is your best contribution to the process, leaving the fieldwork to professional advisers and supervising them.

Time frames for the Phases of the Sale

Phase 1: Analysis of the company and the operation

In this first phase, you have to reach an agreement with shareholders and prepare the company for a sale. Two documents are prepared: the blind profile and the company’s sales notebook. The information memorandum must reflect the reality of the company and its most positive aspects, so that potential investors have the necessary information to assess the purchase. Once the analyst team has all the information about the company, they can prepare the sales notebook in 1 month.

Phase 2: Preparation of the Valuation Report and search for candidates

The Valuation Report helps the seller know their company’s value and can take 1 month to prepare. Regarding the search and screening of candidates, it is one of the most difficult phases and requires a greater investment of time. Being able to filter up to 700 applications, this phase can last up to 1 month.

“Having to analyze and filter more than 700 companies, the candidate selection phase can take up to 400 hours”

Phase 3: Investor Search and Project Presentation

This phase is time-consuming in assessing the interest of all potential buyers. For each selected application, you must find the appropriate contact, send each of them the teaser of the operation, as well as a confidentiality agreement (NDA). The objective is that each one returns the signed NDA, so that the company’s Information Memorandum can be sent to them.

Considering that you have to negotiate with many people simultaneously, and with each one in different phases, this phase can easily take 2 months.

Phase 4: Negotiation of the sale between Buyers and Sellers

In this phase, the seller and buyer finally come into contact, the necessary documentation is sent, and a period of resolution of doubts (of all kinds) is started. Until a Binding Offer materializes, a resolution usually requires many conversations: the buyer requests exhaustive information and consults with his own team and with the seller; you need full confidence in your investment. This period can last an estimated time of 2 months, depending on the agility of both parties’ responses: Seller and Buyer.

Phase 5: Due Diligence

Due Diligence is a process of profound and professional analysis that the buyer commissions about the company for sale. The buyer wants to make sure of the value of what they are buying and contacts auditing companies and tax specialists to prepare a document that can cost between € 40,000 and € 100,000. All this searching, analysis and coordination of information delivery between the two parties can take up to 3 months

Phase 6: Closing

After the agreement, the closing requires the preparation of a Sales & Purchase Agreement (SPA), which a specialized commercial lawyer must prepare. The preparation and negotiation of this contract and the parallel documentation (such as shareholder agreements) can take between 1 and 2 months

Is it possible to make the time frames profitable and even shorten them?

Now that you have an idea of the process and its timeframes, you will ask yourself one last question: is it possible to shorten the timescale ofthe sale ofthe company? Yes, it is possible.

The key to shortening this time as much as possible is planning, with professionals who know how to provide the appropriate documentation and who have experience in negotiation. By presenting the information in an agile and clear way, fewer buyer doubts will arise, and the timeframe of sale is shortened. Additionally, advisors understand decision times and know the times of the year when activity slows down. Knowing this, they avoid unnecessarily lengthening the buying and selling process.

In the same way that you would not build a house without an architect, the recommendation is that you do not sell your business without an advisor’s help.

ONEtoONE Corporate Finance is a global investment banking group with 200+ M&A Advisory specialists in over 30 countries and 50+ cities worldwide. They have advised on over 2000 successful M&A transactions, with >70% being cross-border deals.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality.

Subscribe now

Deal size >$1 billion

It was a relatively quiet week for deals this big. Only 3 that I could identify. The biggest was unsurprisingly in the Canadian energy sector. Whitecap Resources closed its acquisition of Veren for $10.7 billion. With volatility in global oil and gas markets usually comes M&A in this sector. This was an all-stock deal designed to scale up both businesses. Veren shareholders received 1.05 shares of Whitecap for every Veren share they owned. The Post-Merger Integration (PMI) team has its work cut out for it, as they are expected to >$200 million in synergies and cost savings. With this acquisition, Whitecap now becomes the 7th largest oil and gas producer (and 5th largest natural gas producer) in Canada. It also becomes the 2nd largest oil producer in Canada’s province of Saskatchewan. Management expects the company to be better positioned to ride out market volatility due to its greater scale.

"I truly believe the combined company, with an enhanced excess cash flow profile, strong financial position and compelling return on capital is perfectly positioned to be more competitive and create further shareholder value." - Craig Bryksa, CEO of Veren

Deal size $500 million to $1 billion

Only 4 deals closed this week between $500 million and $1 billion. All were domestic transactions (no cross-border deals). For the most interesting deal, we go to Vietnam where Eastern Ha Noi Real Estate has acquired 100% of Saigon Glory from Bitexco Group for $617 million. Saigon Glory is the developer of the Luxury One Central HCM twin towers in central Ho Chi Minh. This is one of the more visible and ambitious real estate developments in the city. Interestingly, this deal was that it was triggered by the corporate bond market. Apparently, “irregularities” with Saigon Glory’s financial disclosures were uncovered after a prominent businesswoman was arrested for fraud. Since then, Bitexco Group has been struggling to make bond payments, and the sale of Saigon Glory was expressly to raise funds to ensure bondholders get paid. Eastern Ha Noi Real Estate was able to acquire a prized development project as a result. Since 2022, a national anti-corruption campaign has intensified and put stress on the country’s real-estate developers. For real-estate developers looking to enter Vietnam (a growing and vibrant economy in South East Asia), there may well be some bargains to be found as the corporate bond market triggers more asset sales. I’ll be keeping my eyes out.

Deal size $100 million to $500 million

There was more action in this deal size range than for the previous two, with 11 deals closed in total. The most interesting was Euronext’s acquisition of Norway’s Admincontrol for $445 million. Euronext is a Europe-wide stock exchange (like NYSE or NASDAQ for Europe). As part of their Innovate for Growth 2027 strategy, they are aiming to increase their share of SaaS subscription revenues. Admincontrol is a leading provider of corporate governance and secure collaboration software with an extensive presence in the Nordics and UK that complements Euronext’s strategy. This acquisition will strengthen Euronext’s Corporate Solutions business and more than doubles the size of their corporate governance software offerings and capabilities. There are high expectations with this deal. Admincontrol has grown at double digit rates for the last 5 years. Despite this, the deal is expected to be accretive to ROCE only after 3-5 years.

“The acquisition of Admincontrol is a major milestone in the delivery of Euronext’s “Innovate for Growth 2027” ambition to scale up our SaaS business. This transaction will improve our share of subscription-based revenue. The acquisition of Admincontrol positions Euronext Corporate Solutions as a leader in the governance SaaS space and expands our access to new markets in the Nordics where we have already expanded our presence over the years with promising growth prospects. Euronext has all the tools and the relevant network to accelerate the growth of Admincontrol’s state-of-the-art governance solutions. Euronext looks forward to welcoming Admincontrol’s talented teams to further accelerate the deployment of its strategy in Europe.” - Stephane Boujnah, CEO of Euronext

Deal size $50 million to $100 million

For this deal range we return once more to the energy sector - only this time with solar. Nextracker, a solar tracker company (the technology that allows solar panels to follow the sun) has acquired Bentek for $78 million. Bentek provides engineered, pre-assembled electrical balance of systems (eBOS) solutions for the solar market (think all the electrical components needed to build and coordinate a solar farm). The deal significantly expands Nextracker’s offerings in the solar space, and positions them to integrate their top-line solar tracker products with Bentek’s eBOS offerings. This creates much more of a “one stop shop” for solar installations.

“It is fantastic to join forces with Bentek, expanding the Nextracker platform with exceptional eBOS products and expertise…Together, we can offer fully engineered, integrated solutions that can help accelerate procurement and construction timelines and reduce installed cost, all backed by the trusted Nextracker brand. We believe that an integrated design approach can unlock synergies between the mechanical and electrical subsystems, driving enhanced customer value and creating a new and powerful solar power plant platform business model.” - Howard Wenger, President of Nextracker

Deal size <$50 million

Deals don’t have to be huge to be interesting. There is often a lot that happens in this small to mid-cap world that flies under the radar. This week’s deal of interest is Universal Digital’s acquisition of Geometric Galaxy for $9.6 million. Universal Digital has a curious background. It is formerly Minas Metals, a Canadian junior mining exploration company searching for battery metals in Brazil. I’m guessing the mining exploration turned up nothing of interest, as the company changed to Universal Digital. This new entity will invest in digital assets, businesses and private and publicly listed entities focused on blockchain, cryptocurrencies and cryptocurrency technologies. As part of this, Universal Digital has now acquired Geometric Galaxy, a British Virgin Islands company that owns and operates BullWave which is a SaaS analytics platform for crypto traders. Universal digital had acquired 19% of Geometric Galaxy as part of its business change from Minas Metals. This more recent deal sees them acquire the remaining 81% share. The deal highlights Universal Digital’s complete transformation away from being a Mining business to now being a strategic investor in the world of blockchain and crypto.