FAQ's Corporate Finance: Find the answers to your questions here

Merger and Acquisition Operations, Company Valuation, Buying vs. Selling…do these concepts concern you?

Browse through the 10 most common questions we encounter about M&A operations

1. What does M&A mean?

M&A is the English acronym corresponding to Mergers and Acquisitions. This type of operations are supported by Purchase and/or Sale Mandates, within the scope of which target companies are identified and potential national and/or international investors are selected, appropriate to the companies' strategic objectives.

2. What is the difference between merger and acquisition?

A merger is, for example, when two companies understand that the best path to growth and expansion is for both to come together and design a new one. In practice, the two companies become one.

We talk about acquisition in an operation characterized by the total or partial purchase of shares in one company by another, taking into account that the acquiring organization retains more than 50% of the capital and starts to control management decisions.

3. What are the main reasons for concluding mergers and acquisitions?

The reasons for the occurrence of this type of operations tend to be strategic and/or financial. Among the strategic reasons, we highlight as an example the goal of diversifying the company's products or market, internationalization or consolidation of presence in the current market. At the same time, regarding financial reasons, we highlight the goal of increasing the company's revenue and profits, or even obtaining access to new financing or lower interest rates.

4. What is a company valuation?

Valuing a company is a process that aims to help define the fair value of the company. The value defined by this assessment is what will be considered in processes of buying and/or selling companies, raising capital and in merger or spin-off operations.

Discover the 3 different perspectives that are usually used in the process of evaluating a company: https://www.yunitconsulting.pt/en/knowledge/blog/business-valuation-why-is-it-relevant/654/

5. What should I take into account when calculating the value of my company?

The value of a company or business depends on many factors, namely the continuity scenario and macro and microeconomic assumptions. The performance history, trends in the sector of activity, internal resources and skills as well as the customer base and geographic distribution are some of the factors that influence the value of a company.

6. When should I valuate my company?

Any decision made to improve the productivity or competitiveness of your business must consider the value of your company. This assessment must be carried out periodically to update values, following market trends and changes made to the company. You never know when an opportunity for growth may arise, whether through the entry of investors into the company's capital or through a process of mergers and acquisitions.

7. What is a PMI team?

PMI is the English acronym for Post Merger Integration. The PMI team works regarding the post-merger integration process, with the aim of harmonizing operations and managing the organizational and cultural differences of the companies involved in the transaction.

It is a fundamental element of the operation to ensure that the expected results and benefits are achieved. Inadequate implementation of post-merger integration can lead to wasted opportunities, internal conflicts and even transaction failure.

8. What is Due Diligence?

Due Diligence is normally a demanding process where a potential buyer hires an independent entity to assess, in detail, the financial strength and potential of a business they intend to acquire, to ensure that they will make a good purchase. It is an essential and important process of reviewing the information provided by a company that is in the process of being sold, by the potential buyer, before making the purchase with the aim of validating and/or confirming the financial data, income and expenses, contracts with customers and suppliers and other relevant aspects of the business.

Although the Due Diligence process is normally carried out by the buyer, there has been an increase in the practice of due diligence carried out by the seller, vendor due diligence (VDD).

9. What is a SPA?

A SPA, Shares Purchase Agreement / Stock Purchase Agreement, as the title reveals, is a purchase and sale contract. However, due to the object of the operation – quotas or shares issued by legal entities – the SPA contains some specificities, since the shares or quotas of a company are transacted here, a dynamic and constantly changing “entity”.

10. What is an NDA?

An NDA (“Non Disclosure Agreement”, in Portuguese “Non-Disclosure Agreement” or “Confidentiality Agreement”) is a contract that provides for the confidentiality of information shared between the parties. It is a very important “piece” in the context of buying and selling companies as it establishes the conditions for the exchange of confidential information between the parties, stipulating the use that can be made of this information, who has access to it and what the consequences will be. in case of violation.