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How do you value synergy?

Understanding the business: TheNonExec, Boutique M&A, reviews all aspects of the business including financial data & KPI’s, understanding the product or service and its competitive USP to understand the business in detail

We are often asked at the beginning of a sell side project why we are so obsessed with understanding every aspect of the business. We not only review financial data & KPI’s but we seek to understand in detail the product / service and its competitive USP. In particular, we take time to really understand the markets the business operates in.

Having taken the time to appreciate our client’s business right from the outset, (step one in our 8-step strategic business sale process), we are well-placed to discuss with potential buyers the merits of strategically acquiring our client’s business and the potential synergies available as part of a deal.

What sort of synergies are we seeking? Sometimes the value is in acquiring a proven distribution channel such as the acquisition of Ocado by M&S earlier this year. Alternatively, it can be to secure intellectual property (IP) or know-how that would give immense value to the purchasing company. A great example of this synergy is the recent acquisition by Tesla of Canadian battery manufacturer Hibar Systems Ltd. The acquisition happened under-the-radar sometime between July and October 2019. Tesla also purchased a similar company, Maxwell Technologies, a California-based producer of ultracapacitors and batteries, in May 2019.

American automotive and energy company, Tesla, designs, manufactures and markets luxury electric cars, powertrain components and batteries. Historically, since 2014, Tesla has depended on Panasonic for battery cells but that appears to be coming to an end, especially with the merger between Tesla and Hibar.

It had been rumoured for a while that Tesla wanted to produce lithium-ion batteries in-house. The company has worked in close conjunction with Jeff Dahn, Professor of Physics at Dalhousie University. He has been somewhat of a consultant for the company in terms of battery production. When CEO Elon Musk announced he wanted to produce a million-mile battery, Dahn’s team of researchers ratified feasibility and published a white paper confirming the idea is attainable.

Strategic partners will generally value a company that offers strong symbiotic alignment significantly higher than, for example, a pure venture capitalist deal. Properly understanding a business and its markets allows us to identify where synergy could be created by an acquisition of our client’s business. Our industry experience within our specialist sectors means that we are able to widen the research brief into areas our clients had not previously considered. Find out more about our strategic sale service.

To discuss a potential strategic sale of your business call 01202 828266 or book a no obligation exploratory session here.