Articles on selling and buying companies, valuation, growth financing and working with investors. We write about what we see in the transactions we run for business owners in Poland.
If you are preparing a company sale, an investor search or a financing round, please contact us.
The first hundred days after the deal. What the price does not show
It was a summer Friday morning when the phone rang. The CEO of a company whose majority stake we had sold together to a financial investor asked to meet that same day. Nothing bad had happened. The company’s results were good, the investor was behaving properly and nobody had cheated anybody. The CEO simply said […]
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The owner’s EBITDA and the EBITDA a buyer will pay for are two different numbers
When the investor left the conference room, the owner gave his adviser a reproachful look and said: “This is not how I pictured our work together.” He had walked into that meeting with EBITDA of PLN 12 million. He walked out with PLN 9.5 million. Nobody questioned a single invoice. The owner had excluded eleven […]
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A PE fund’s refusal usually says more about the fund than about the company
It was late in the evening, and we were sitting in a newly opened bar in central Warsaw. A friend of mine, a partner at a private equity fund, ordered his third beer and said he was very tired of saying no. I asked how many companies he looks at for every one his fund […]
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Succession has three routes, and each takes a different amount of time
A business owner who had been referred to us asked to talk one on one, away from the office. He came with a sheet of paper. He had written down his questions because he was afraid he would forget something. I have changed the details so that neither the company nor the parties can be […]
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Due diligence is the last round of price negotiation
Owners prepare for due diligence, the buyer’s review of the company, as if it were a test of honesty. They assume the buyer is checking whether what they said is true, and that it is enough to hide nothing. The buyer is interested in something else. He is looking for items that can be turned […]
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Four valuations of one company. Each answered a different question
Sixty, eighty-four, one hundred and two and one hundred and forty-four million zlotys. One company and one quarter, yet the highest of the four valuations is almost two and a half times the lowest. It is easy to take such a spread as proof that business valuation is an arbitrary art. In my view there […]
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Partner splits most often begin with the company’s success
The owner who came to me with this matter had spent three years trying to persuade his partner. During that time the company grew more slowly than it could have, and so did the value of both owners’ shares. Each of them owned half of the company, so they paid for the dispute in equal […]
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What a transaction adviser is paid for. Buyer contacts are the cheapest part of the service
The owner who called me eighteen months ago had chosen a cheaper adviser’s offer. What it bought him was access to investors. Nobody prepared the company, and no investment thesis or materials were produced that could have defended the valuation. There was also no one to sit across from the buyer’s analyst and defend three […]
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Expensive debt can cost the owner less than giving shares to a fund
A company generates PLN 15 million of EBITDA and is worth PLN 120 million. A partner who holds 40 percent of the shares wants to leave, so PLN 48 million has to be found. The bank agrees to lend at most PLN 30 million, or two times EBITDA, and refuses the missing PLN 18 million. […]
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What a private equity fund is for. The owner buys experience and pays for it with shares
A company worth PLN 100 million that grows by 10 percent a year from its own profits will be worth about PLN 195 million in seven years. The owner will keep 100 percent of the shares and will make every decision himself. A private equity fund promises faster growth. In return it takes part of […]
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Management incentive plan. The owner gets exactly what he pays for
The owner set up a plan to keep the management board in place until the company was sold. He built it as simply as he could: whoever stays three years gets a payout. The people stayed. The company paid the bonuses down to the last zloty. Over those three years the business barely grew, because […]
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Earn-out. How 40 percent of a company’s price disappears in the agreement’s definitions
An earn-out is the part of the price that the buyer pays later if the company achieves agreed results. A seller who accepts one takes on something he rarely says out loud. Payment of that part will depend on decisions he no longer makes himself once he has handed over the company. Four legal decisions […]
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Company debt before a sale. Too little costs you for years, too much costs you at the deal
A business owner usually knows the company’s value to within a million. Asked about debt, he most often answers with one of two sentences. Debt is cheap, so the more the better. Or: debt is a risk, so the less the better. Both answers lead to losses. The only difference between them is when the […]
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Cash in the company’s price. Why a seller who fights over the operating minimum loses on the surplus
Three weeks before signing the sale agreement, the owner was still arguing with the buyer over a few hundred thousand zlotys of cash. The issue was the minimum that has to stay in the company after the deal. At the same time, the company’s balance sheet held an asset unrelated to the business that was […]
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Mezzanine or selling shares. Why capital that sounds like usury can be cheaper for the owner than a new partner
The most expensive financial decision we saw at Capital One Advisers last year was made by an owner who turned down mezzanine. He heard that it costs between 10 and 20 percent a year, called it usury and chose a solution that looked cheaper. He let a minority fund into the company. He gave it […]
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Four routes to capital. Why decisions made two or three years earlier determine how a mid-sized company is financed
In February, the owner of a manufacturing company came to see us. He had run it for fourteen years, and run it well. He brought a three-year growth plan, a carefully calculated capital requirement and one question. He wanted to know which route to choose: a bank loan, mezzanine, bringing in a fund or the […]
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The sponsor’s political capital. Why an investment committee approves only a price that someone at the buyer is ready to defend
On a Friday evening, I got a call from the person who was running the transaction on the buyer’s side. That person had one question. They wanted to know how, in the EBITDA bridge, we had calculated the normalization of the pay of a management board member who was to stay with the company after […]
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The longlist as a filter. Why the highest price is often paid by a buyer the seller did not have on the list
In one of the sale processes we ran at Capital One Advisers, the highest price was paid by an investor that was not on the list prepared by the seller. We added it ourselves, but only to list B, the second priority tier. It did not respond in the first round. On the Tuesday after […]
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The EBITDA bridge. Why an unqualified audit opinion does not protect the sale price of a company
I took part in a meeting that summed up the financial due diligence of a company. At the meeting, the buyer’s advisers presented four EBITDA adjustments. The seller’s model did not include any of them. Together they reduced the company’s result by about PLN 2 million. In three cases, the buyer’s advisers were right. The […]
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Types of offerings of financial instruments
Under Polish law, there are different types of public offerings of shares, each regulated separately by the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organized Trading, and Public Companies (ustawa o ofercie publicznej, UOP)1. The most important of them are: 1: Act of 29 July 2005 on Public Offering, Conditions […]
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The importance of the new ASO rules for the safety of the NewConnect market
The NewConnect market, known for its innovation and dynamism, has long struggled with the problem of issuer quality and the limited transparency of share offerings. This has led to weak financial results of companies after their debut, breaches of good market practice standards and, as a consequence, losses for investors. The response to these challenges […]
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10 key sources of post-merger value creation
In the highly demanding world of mergers and acquisitions, one might think that completing a deal is the final goal. However, experienced players understand that true success lies in the value created after the deal is completed. This is the moment when you get to know the reality, so a well-thought-out post-merger strategy is the […]
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A historical perspective on mergers and acquisitions
A delightful aspect of the global business landscape is the cyclical nature of mergers and acquisitions (M&A) activity. If we look back over the last century, we see distinct M&A “waves”, each characterized by its own unique drivers and outcomes, reflecting the broader social and economic context of their respective eras. From the initial wave […]
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