Acquisition of a company - export and re-export of dairy products

16.7.2018

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An important company operating mainly in the domestic ownership interest market in Slovakia and Poland is actively engaged in import, export and re-export of dairy products.

Foreword

The owners of the group wanted to take the opportunity to expand the portfolio of the company whose business consists in slicing and packaging the meat products and cheeses. APOGEO has been given a full mandate for the comprehensive acquisition consultancy and negotiation with the counterpart's representatives.

The owners considered available and alternative options to extend their control over the value chain at a vertical level. The acquisition of a processing line for slicing and packaging of products was an absolute must for the new business. One of the options was the construction of a completely new facility and acquisition of a new processing line. Another option was to acquire the processing equipment from the current supplier. The decisive factor was the financial and time demand, which favoured the acquisition of the functioning and well-established company.

Progress

The initial contact and articulation of intention took place within the framework of supplier-customer relations between the sales participants. The follow-up negotiations and transactional processes were attended by the consultants of both the parties. The APOGEO's mission was to find a solution to meet the client's needs, to cover the transaction in every aspect (subcontracts for legal representation, tax and accounting consultants, auditors, etc.), to arrange for and provide all contractual documents and ensure the smooth process of the transaction through active participation in meetings with the counterpart, preparing the arguments, etc. In order to take into account the received subsidy, tax consequences and transaction costs, we have chosen the sale of 100% of the company's shares.

Following the negotiation between both the parties regarding the amount and the calculation of the purchase price, a Letter of Intent was drawn up and signed setting out all the conditions for the conclusion of the Share Transfer Agreement (purchase price calculation, influence of due diligence on the purchase price, etc.). Subsequently, legal, tax and accounting due diligence were carried out, largely designed by APOGEO, the results of which were had significant impact on the reduction in the purchase price.

Signing and closing (signing the contractual documents and execution of the transaction) took place in the bank, owing to the payment of the purchase price; a security account was used for the transfer of financial resources. The client requested a purchase of a company free of any debts towards the bank. For this reason, the purchase price was divided into two parts, where a part of the purchase price was used as a settlement of the debt and the other part as the payment of the purchase price. Due to a time gap between the purchase price calculation and the closing of the transaction, the change in the working capital was subsequently calculated for the period concerned and the final purchase price adjusted.

Conclusion

Although both the parties used the services of professional advisors, the purchaser evidently had a more advantageous negotiating position. One of the reasons was a wider team of advisors as well as lack of any time stress. For the seller, on the contrary, every little postponement of the transaction closing date meant more money to finance the operation of the company which had already been loss-making for some time.

Thanks to cooperation with APOGEO, there was a significant reduction in the purchase price (about 40%) and the entire transaction went smoothly. Once the packing plant was acquired by the new owner, APOGEO also provided post-acquisition consulting during which it helped the client e.g. with the take-over of the accounting and the change in the accounting software. The company with the new owner doubled its production within a few months, and it has been following the rising trend ever since.

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