M&A market in turbulent times — property-based financing as a solid building block

The situa­tion on the M&A market is curr­ently extre­mely ambi­va­lent: chal­lenges, risks and uncer­tain­ties on the one hand and rewar­ding deals and deve­lo­p­ment oppor­tu­ni­ties on the other. Company valua­tions have recently fallen to their lowest level for ten years. The number of mega deals is also falling shar­ply: inves­tors are shif­ting their efforts towards smal­ler and medium-sized tran­sac­tions in order to be less depen­dent on fluc­tua­tions in the econo­mic situation.

There are oppor­tu­ni­ties in areas such as medi­cine and medi­cal tech­no­logy, tech­no­logy and the rene­wa­ble energy sector. In sectors such as retail, indus­try and real estate, the need for restruc­tu­ring has increased due to infla­tion, the energy crisis and disrupted supply chains. Accor­ding to the PwC half-year report, an incre­asing number of distres­sed M&As are to be expec­ted here.

The acqui­si­tion of compa­nies in crisis via distres­sed M&A offers parti­cu­lar poten­tial in the current uncer­tain times. PwC is not alone in assum­ing an increase in non-performing cases in its study. The insol­vency trend of the Leib­niz Insti­tute for Econo­mic Rese­arch Halle also showed the highest number of company bank­rupt­cies in seven years in June 2023. And even if the situa­tion eases slightly after­wards: The complex econo­mic envi­ron­ment conti­nues to provide suita­ble condi­ti­ons for distres­sed purcha­ses. Howe­ver, the acqui­si­tion of a distres­sed company does not only offer the buyer oppor­tu­ni­ties for growth, know-how and further deve­lo­p­ment. In this way, the acqui­rer also assu­mes entre­pre­neu­rial respon­si­bi­lity, enables the restruc­tu­ring of a company and helps well-estab­lished work­forces to achieve conti­nuity in their cooperation.

The risk appe­tite factor plays a central role in distres­sed M&A, espe­ci­ally for the finan­cier. The usual house bank is usually not available as a lender in such a special situa­tion. Due to the current uncer­tain situa­tion, banks are rest­ric­tive when it comes to lending anyway.

The other key chall­enge is the time factor — a weak­ened company can sink deeper into crisis every day. If key stake­hol­ders such as custo­mers, part­ners or employees turn their backs on the company, its entire survi­val is quickly at stake. There are now nume­rous finan­cing alter­na­ti­ves or supple­men­tary compon­ents for reali­zing an M&A. This also includes the object-based models of Asset-Based Finance: Sale & Lease Back and Asset-Based Credit. As these are not depen­dent on credit­wort­hi­ness and are available at short notice, they are also suita­ble for tran­sac­tions in econo­mic­ally vola­tile times. If the assets in the company balance sheet are alre­ady largely depre­cia­ted, hidden reser­ves can often also be reali­zed. Thanks to its inde­pen­dence from credit­wort­hi­ness and speed, SLB is parti­cu­larly suita­ble for restruc­tu­rings, reor­ga­niza­ti­ons, insol­ven­cies and distres­sed M&A. It usually takes three to six weeks from the initial inquiry to the final payment of the purchase price.

About Carl-Jan von der Goltz | goltz@maturus.com

Carl-Jan von der Goltz is the foun­der of Maturus Finance GmbH, a bank-inde­pen­dent finan­cing company for new approa­ches to corpo­rate finan­cing. The finan­cial services provi­der supports medium-sized produ­cers who want to expand their finan­cing struc­ture through stra­te­gic addi­ti­ons to their banking rela­ti­onship. Finan­cing solu­ti­ons are offe­red from a volume of 400,000 euros and up to 15 million euros (current value of the machi­nes). As a rule, this corre­sponds to company sales of around 5 million euros to 250 million euros.