3 external M&A firms advise on DQ&A | incuBeta deal

16 November 2015 Consultancy.uk

South Africa-based incuBeta and Netherlands-based DQ&A Media, both digital marketing agencies, have agreed to a merger. Combined the firms will have roughly 400 full-time staff, across 13 offices worldwide. The deal was advised on by dealmakers from Capitalmind, Eversheds and Huddle.

To meet the evolving digital market demands and changing client requirements, as well as boost their scale and geographic reach, incuBeta and DQ&A Media have decided to merge*. Founded in 1995, incuBeta is a South African-based marketing performance group that provides local and international organisations with a range of digital and media services. The digital agency has operations in six countries (South Africa, UK, Australia, Singapore, China and Kenya) and serves among others Standard Chartered Bank, Europcar, Old Mutual, Woolworths, Prudential and Times Asia. DQ&A Media, a counterpart based in the Netherlands, boasts a similar service portfolio, and operates with offices in its home base, Germany, Spain, Italy, Switzerland and the US.

DQ&A | incuBeta deal

Combined, the merged company will have more than 400 employees in 13 offices, and generate revenues of over €100 million, say the newlywed partners. “We have created one of the world's largest, independent, international groups of digital agencies,” highlights Rick van Boekel, CEO of DQ&A Media. Van Boekel in addition adds that the two companies are highly complementary, not just from a geographical perspective, but also in terms of services and products. While DQ&A is particularly strong in programmatic digital media buying, its African merger partner specialises in search engine marketing and web analytics. “Our advertisers are increasingly asking for both services, because after someone has viewed an online video a targeted search advertisement can generate more hits and conversion,” explains Van Boekel. To date, DQ&A Media typically had to sell a ‘no’, with incuBeta facing a similar challenge at the other end of the spectrum.

Throughout the deal process the digital agencies were supported by M&A advisors from three external firms. For financial advisory services, DQ&A Media hired Capitalmind, a corporate finance firm with offices in the Netherlands, France and Denmark. The M&A consultants supported the company with among others the structuring of the deal, the commercial due diligence process and facilitated the negotiation phase on behalf of DQ&A’s shareholders. Legal support was provided by Huddle, a boutique Amsterdam-based law firm. The South Africans were legally advised by Eversheds, complemented by an in-house team of lawyers, while M&A and transaction support was provided by the firm’s internal corporate strategy unit.

External M&A Advisors- DQ&A - incuBeta

Consolidation drive
The merger between the two is yet another example of the consolidation push in the broader digital marketing landscape. While for long the deal arena was dominated by the large players – WPP, Publicis, IPG and Omnicom (mostly to recover terrain in the online space) – more recently smaller agencies are increasingly joining forces to accelerate their growth, while also venture capitalists have of late boosted their investments in boutique, or mid-sized players. Building on their added financial strength, DQ&A Media and incuBeta have unveiled they are contemplating further “strategic acquisitions” in the near to medium-term to expand their services and reach.

* The deal between incuBeta and DQ&A Media was closed on 5 November 2015.

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8 tips for successfully buying or selling a distressed business

18 April 2019 Consultancy.uk

Embarking on the sale of a business is one of the most challenging experiences a management team can undertake. Even serial dealmakers acknowledge that the transaction process can be gruelling, exposing management to a level of scrutiny and challenge through due diligence that can be distinctly uncomfortable.

So, to embark on a sale process when a business is in distress is twice as challenging. While management is urgently trying to keep the business afloat, they are simultaneously required to prepare it for scrutiny by potential acquirers. Tim Wainwright, an experienced Transactions Partner with Eight Advisory, says that this dual requirement means sellers of distressed businesses must focus on presenting their business in a way that supports buyers in identifying value, whilst simultaneously being open about the causes of distress. 

According to Wainwright, sellers of distressed businesses should focus on eight key aspects to ensure they are as well prepared as possible:

  • Cash: In a distressed situation cash truly is king. Accurate forecasting and day-by-day cash balances are often required to ensure any buyer is confident that scarce cash reserves are under proper control. 
  • Equity story and turnaround plan: Any buyer is going to want to understand the proposed turnaround strategy: how is the business going to enact its recovery and what value can be created that means the distressed business is worth saving? Clear presentation of this strategy is essential.
  • The business model: Clear demonstration of how the business model generates cash is required, with analysis that shows how financial performance will respond to key changes – whether these are positive improvements (e.g., increases in revenue) or emerging risks that further damage the business.  Demonstrating the business is resilient enough to cope with these changes can go a long way to assuring investors there is a viable future.
  • Management team: As outlined above, this is a challenging process. The management team are in it together and need to be consistent in presenting the turnaround. Above all, the team needs to be open about the underlying causes that resulted in the distressed situation arising.  A defensive management team who fail to acknowledge root causes of distress are unlikely to resolve the situation.

8 tips for successfully buying or selling a distressed business

  • Financing: More than in any traditional transaction, distressed businesses need to understand the impact on working capital. The distressed situation frequently results in costs rising as credit insurance becomes more difficult to obtain or as customers and suppliers reduce credit. Understanding how these unwind will be important to the potential investors.
  • Employees: Any restructuring programme can be difficult for employees. Maintaining open communications and respecting the need for consultation is the basic requirement. In successful turnarounds, employees are often deeply engaged in designing and developing solutions. Demonstrating a supportive, flexible employee base can often support the sale process.
  • Structuring: Understanding how to structure the business for the proposed acquisition can add significant value. Where possible, asset sales may be preferred, enabling buyers to move forward with limited liabilities. However, impacts on customers, employees and other stakeholders need to be considered.
  • Off balance sheet assets: In the course of selling a distressed business, additional attention is often given to communicating the value of items that may not be fully valued in the financial statements. Brands, intellectual property and historic tax losses are all examples of items that may be of significant value to a purchaser. Highlighting these aspects can make an acquisition more appealing.

“These eight focus areas can help to sell a distressed business and are important in reaching a successful outcome, but it should be noted that it will remain a challenging process,” Wainwright explains. 

With recent studies indicating that the valuation of distressed business is trending north. With increased appetite from buyers who are accustomed to taking on these situations, it is likely that more distressed deals will be seen in the coming months. “Preparing management teams as best as possible for delivering these will be key to ensuring these businesses can pass on to new owners who can hopefully drive the restructuring required to see these succeed,” Wainwright added.