Page 26 - PWM2024_November EBook

BETTER BUSINESS

Two become

one

It’s not hard to find examples of mergers and
acquisitions (M&A) within the print and related sec-
tors, by Adam Bernstein

his year alone Printweek get company’s board approves the
has highlighted at least 16 transaction.
instances involving two
Claverley Group subsidiar- Deals done
ies (January), DS Smith M&A activity is big business. IFLR,
Tand Mondi (February), an online publication that covers
News UK and DMG (March), financial regulation, M&A, ESG and
Smurfit Kappa and Westrock (April), related areas, noted in March 2024
and Sonoco and Eviosys (June). that despite headwinds of “steadily
There are, of course, others doing rising interest rates, inflationary
the same. But for those new to the pressures, geopolitical uncertainty,
process, what does it involve? and regulatory actions” that saw
In summary, M&A involves trans- deals drop in volume, there were
actions where two companies com- nevertheless many transactions that
bine in some form. Though often did complete. These deals were val-
used interchangeably, mergers and ued at £109bn in 2023, albeit down
acquisitions have distinct legal defi- significantly from £191bn in 2022.
nitions. A merger occurs when two Kavanagh points out that because
companies of similar size join to cre- M&A is the process of buying and/or And from a buyer’s perspective, Kavanagh suggests that they “may be
ate a new single entity. An acquisi- selling a business or its assets, “it’s looking to grow their business by acquiring a new service or product offer-
tion happens when a, typically larger, just as relevant and applicable for ing or by adding a profitable company to the group, or to consolidate their
company takes over a smaller one, SMEs as it is for global multination- market position by buying out a competitor”.
absorbing the smaller firm. als and blue-chip corporations”. In
Andrew Kavanagh, a partner and other words, whenever there is a Considerations
member of the Corporate & value transaction whereby one busi- Many sales take the form of a share sale rather than an asset sale. The for-
Commercial team at Bishop & ness acquires the assets or shares of mer transfers ownership interests in the company, whereas the latter
Sewell, reckons that there’s “a cer- another, it’s an M&A. means the sale of assets and business to another company.
tain mystique around M&A in the And from a practical standpoint, Taylor says that there are benefits and drawbacks to each, but a key
UK, and the term is something of a Paul Taylor, a partner in the corpo- driver is tax: “A share sale may give rise to capital gains tax on the profits
misnomer when applied to our cor- rate department of Fox Williams, made. An asset sale will result in corporation tax on the proceeds of the sale
porate law”. He tells how ‘M&A’ is, in says that deal success depends on
essence, an imported acronym from understanding what a M&A seeks to made by the company. Once the company has paid the corporation tax, the
the US where it covers the process of accomplish. For many he says that proceeds of the sale can then be distributed, but if the owners are individu-
buying and/or selling a business or its “the goal is to achieve a clean exit als, they will be charged income tax on the proceeds.” In effect, he warns
assets. He contrasts that with the from a business. But some may wish that there can be double taxation on an asset sale which is why share sales
meaning on this side of the Atlantic: to stay on and become a part-owner are preferred.
“In the UK, we generally focus on of a bigger business that makes the For Kavanagh, the issue that decides which route is taken relates to
acquisitions where one distinct legal acquisition”.Kavanagh thinks the whether the buyer wants to take over the entire business or cherry-pick the
entity undertakes to purchase same. However, he adds that a seller best parts. As he explains, there are two key questions: “Where does the
another. In the US, mergers are also may also have other considerations buyer see the value of the transaction and what is acceptable from the sell-
common, where two entities com- in mind such as how their staff or er’s perspective?”
bine into a single new entity.” existing customers will be treated
M&A deals can be either friendly going forward, or whether to be Regardless, he identifies a major issue – valuation.
or hostile, based on whether the tar- involved for a transition period. “Traded companies,” he says, “are listed on a regulated market/stock

24 PrintWeek MENA November 2024 www.printweekmena.com