Perfecting the M&A deal – how to maximize your returns and get the best partner(s) on board

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It’s no secret that logistics and last-mile delivery companies have experienced incredible growth over the past few years and that the sector is on the investment vertical of both private equity and venture capital funds.

During the second half of 2021 alone, specialist merger and acquisitions (M&A) consultancy Last Mile Deals traced more than 25 transactions closed in Europe (based on Mergermarket.com data) – double the number of deals closed for the same period in 2020 listed on Mergermarket.com.

Mid-size transactions like the recent series of acquisitions by Maersk (which in 2021 acquired B2C Europe, LF Logistics, Visible SCM and HUUB) are often below the radar and have not been monitored and included in the above statistics.

Given M&A players’ increased focus on the sector and the increasing need for finance as the sector grows and evolves, attracting investors has become a ubiquitous topic in e-commerce logistics.

What is less apparent is the benefit of experience and tried-and-tested models. Players who have done it before know that the road from first pitch to closing is a long and winding process of ‘chutes and ladders’. Based on Last Mile Deals’ experience, more than 70% of the deals fail for different reasons, often in the very last leg of the transaction. If you can nail the strategy and preparation, you can be among the lucky 30% who have successfully closed the deal.

So how do you achieve this elusive goal? Here are four important things to consider in the M&A process:

  1. Start with strategy: The number one task of every founder, owner or CEO is vision and strategy. This also holds true for mergers and acquisitions and, in practice, they are often the instrument to help achieve this vision. Therefore, the first and most important step is to set the goals of the process. From the very first day it should be clear whether the company just needs capital for operational growth, strong support from a larger strategic player, or the founders seek a cash exit. This will set the tone for the further process.
  2. Understand your situation and options: Setting your goals without knowledge of the market, the valuation multiples, trends and active players can only lead to disappointment. You, as a business owner, need to know what the strategic advantages of your business are, the market presence and the company’s growth potential. And remember, there are different routes that can lead you to the desired vision, so knowing the options as well as their advantages and the sacrifices you need to make is important not only for closing the deal but also to support a successful post-deal integration.
  3. Know the environment: Identify strategic players actively seeking this type of business, and understand which private equity (PE) funds recently raised money and have your sector, business size or geography in their investment vertical. Knowing the investors and the added value each of them can bring – such as access to markets, synergies with other portfolio companies or specific knowledge – is a vital additional benefit. Based on our experience at Last Mile Deals, this information is a true game-changer and a focal point for setting the next important stage i.e. the preparation.
  1. Prepare: The process of selling your company or getting investors on board takes on average between four and nine months, and every single day of this period is all about preparation, from estimating the sales forecast through pitching, involvement of the team and contract negotiations. Those who have done it before will tell you, it’s all about knowing the tricks of the trade, speaking the language and getting the investors on board.

While the topic of preparation warrants a good 20 pages, let us give you a short example of why a tailor-made approach is so crucial. A founder of a mid-size fulfillment company shared the following story with us at our first meeting: “For our fundraising, we approached several private equity funds but none of them replied. The business is going well, and I do not know what the issue is and why they don’t come back to us.”

We at Last Mile Deals experience this type of feedback quite often and call it mismatch between goals and preparation. This was our response: “If you are looking at a PE fund to raise growth equity and increase the market share of the company, you should sell this story starting from your vision and ending with detailed forecasts of how you will achieve this growth both organically and through acquisitions. Clearly indicate what return you can deliver, look at how things work in practice: the team behind the PE fund is calculating their exit money at this very first screening step. If you cannot show your potential and how you can utilize the funds to realize this potential, then there is no investment case and this is a key reason for early-stage rejections.”

The M&A world is big and there are opportunities everywhere, especially in and around the last mile. To begin the process, it’s important to focus on the vision and the long-term objective. Otherwise, you may end up making short-term decisions that go against your ultimate plan.

Although the M&A fundraising process is not an easy one, there really is ready money up for grabs for those who can navigate this process with skill and the benefit of experience. We never cease to be surprised that for what is arguably the most important decision in a company’s lifecycle, owners often take relatively little time to select their partner or, worse still, go it alone for too long, thereby reducing their chances for the optimal deal.

Marek Różycki is managing partner at Last Mile Experts, specializing in CEP and e-commerce last-mile advisory.

 

Rositsa Chopeva is partner in Last Mile Deals, specializing in corporate finance and M&A transactions in the e-commerce logistics and last-mile sector.

 

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