News and insights | Stressed or Distressed M&A Processes

Stressed or Distressed M&A Processes

July 2022

Many of the stressed or distressed situations THM has been involved in over the years have included M&A processes.

Delivering value in these situations is challenging and places further pressure on a likely already stretched management team. Here are five factors to consider when looking to protect and unlock value.

  • Even a well managed M&A process comes with a high level of risk. However the level increases further in special situations given the inherent challenges, requirement for speed of execution, changing external market perceptions and likely interested parties.
  • Before commencing a sales process, it is fundamental to define amongst all stakeholders ‘what good looks like’, agree key milestones and appropriate incentivisation structures. Without these, execution risks could materialise at critical future stages.
  • A stressed or distressed M&A process is a delicate balance between driving a quick yet competitive process, but without giving any signs that it could be (or become) a fire sale.
  • Hire an M&A adviser with the relevant sector and situation experience, but also one that has a strong network of relationships with key potential buyers.
  • The critical stage of any M&A process is the preparation phase. This is key to ensuring all stakeholders are fully committed to the approach and timetable.
  • Key management workstreams together with the M&A adviser include: business plan and model preparation; vendor due diligence (commercial, financial and legal); data room setup; tax assessment (if relevant); financing options; employee, supplier and other stakeholder communications plan; and warranty & indemnities (including insurance).
  • As with any special situation, the introduction of an M&A process places the CFO and their finance function under significant pressure. Ensuring sufficient availability of resource with the appropriate skillset from the outset is key to ensuring a stable platform from which to deliver an efficient and well managed process.
  • Furthermore, the CFO needs to have the requisite skills, experience and bandwidth to ensure the company provides hands on management of the various workstreams, whilst delivering ongoing business as usual requirements.
  • Have a credible and clearly understood fall back plan ('Plan B') that could be executed in short order to protect further loss of value should the M&A process not result in a deliverable sale at the right price.
  • This also provides an understanding of the likely downside case should there be only one buyer left in the process that needs to be kept honest.

Across our CRO and Value Delivery service lines, we provide support and deep situational experience to address the challenges facing stressed and distressed businesses.

Below are some of our recent credentials involving M&A.

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