In June 2020, amid the novel Corona-19, Saudi Aramco formally completed the Saudi Basic Industries Corporation (SABIC) acquisition. The company now owns a 70% stake in SABIC by investing 259.125 billion (US$ 69.1 billion). The pros of the merger include establishing Aramco’s dominance in the petrochemical industry in the global market. It is one industry that has been growing fast because of the increase in global oil demand. In 2019, both the companies’ combined petrochemical production touched 90 million tonnes, a record in itself. The acquisition is a part of its ‘Downstream strategy’, a long-term strategy to grow its refining and petrochemicals capacity. Aramco benefits hugely from this merger, with the investment becoming a case study for industries on how an M&A can be well-planned and bear impressive results.

On a similar line, the acquisition of Careem by Uber in March 2019 was a successful one. For $3.1 billion, Uber Technologies bought rival Careem, thereby establishing its supremacy over the Middle East. The merger was essential for Uber in the UAE and was termed as an ‘important moment for Uber” after it had faced losses in countries like Russia, Southeast Asia, and China.

But not all mergers and acquisitions go this well. The chances of a failure are more, and the reasons can be many. Among the many reasons of why a merger and acquisition may not end up giving the desired results, one vital reason is that acquiring firms are overpaying for an acquisition. This story has remained the same, more or less all throughout history. A perfect example for this is the acquisition of Snapple by Quaker Oats in the late 1990s. Quaker paid $1.7 billion to acquire the other company, but experts believed that the deal was at least $1 billion higher than what it should have been.

It is as if most acquiring companies rush through the process. In the excitement of it all, they fail to ponder on essential aspects of mergers and acquisitions. Many have failed because the integration of the acquired company with the parent has been poor. Take the case of the Quaker Oats-Snapple merger. On the day the merger was announced formally, both the companies registered a fall in share prices. Within a span of 20 months, Quaker Oats had to sell off Snapple at a loss of about 20%. Poor implementation of the deal backed by changing market conditions was cited as the main reason.

Obviously, the issue was the lack of strategic planning and an apparent enthusiasm to acquire on the acquiring company. What could have stopped Quaker Oats to avoid such a financial goof-up were to take the help of proficient mergers and acquisition consulting services. Some feasible questions that need to be addressed in this context are – what is the right amount to pay for an acquisition, or at what point should acquiring companies decide to move out of the M&A?

In a research conducted by the Harvard Business Review, it was found that there is a systematic way of going about the pricing during acquisitions. There needs to be a detailed due diligence where the data related to the target company needs to be analytically evaluated, and stringent discipline needs to be in place for informed decision-making.

Where is the issue?

Usually, when a decision regarding an M&A has to be taken, the board of directors and shareholders need to vote for or against the merger. However, in most cases, it has been seen that the top management decides in favor of a merger, and the board puts its stamp of approval on it. Shareholders rarely go against such decisions. In most cases, it has been found that the short-term gains are what everybody across the board is interested in. In the process, they push the long-term goals behind. Many a time, it has also been seen that the biggest beneficiaries of such mergers are the top management of executives while the overall acquisition proves to be disastrous for the acquiring company.

The best example here is the acquisition of Jos. A. Bank in the US by Men’s Wearhouse in 2014. While it was a fizzled-out decision for Men’s Wearhouse, with share prices immediately declining by over 50%, Doug Ewert, the CEO of Men’s Wearhouse, saw substantial financial gains as he received a handsome bonus on completing the acquisition.

While greed is one major factor that seems to be behind these far-fetched acquisitions, there are other reasons. As per Mergers and Acquisition Advisors and experts, there is a popular theory called the Overvaluation Trap. It is also something that senior executives get into to justify an over-valued price of mergers while promoting what is termed ‘Flashy Acquisitions’. It helps executives distract everyone, including the board and the market, from other inadequacies and failures grappling with the company.

The Pollyanna Principle also plays a significant role in all of this. Overpriced acquisitions often result because people at the top link a previous success and memories of a positive merger in the past. They feel that such memories will keep repeating, and there would be no negative experiences. Plus, the need for senior individuals to stay competitive can push organizations into embracing over-valued acquisitions. One good example of the top guys’ ego issue was explicitly exemplified when Elon Musk decided to bail out a sick company called SolarCity (SCTY). What happened, as a result, was that the shares of his very famous Tesla plummeted instantly.

Overpaying or over-valuation of M&A is a problem that is one of the gross mistakes that acquiring companies commit. The selling company will negotiate hard and tell you when the price you are getting is not enough, but they will never tell you when they are paying more.

So, what is the solution? Companies that want to acquire or merge, or buyout another firm need to hire well-experienced mergers and acquisition specialists to avoid all such discrepancies and eventual losses.

Importance of Conducting a Financial Due Diligence during M&A

When acquiring or merging with a company, it is imperative to conduct an in-depth analysis of the financial status of a business. As part of this analysis, the financial records and statements are reviewed to get a holistic picture on the financial position of the company. The revenues and margins of each product/ service are reviewed. This due diligence is carried out to make a well-informed takeover or merger decision. The financial due diligence has proved to be an essential tool that help businesses avoid risks that can only be understood when the existing conditions are studied in-depth.

Some of the goals of due diligence are:

●          Assessing the financial position of a company

●          Forecast the Future Cash Flow

●          Uncover unrecorded liabilities

●          Identifications of Key Financial Risks

●          Well-informed decision making

Thus, the major goal of a financial due diligence is to deeply check the company to understand its current financial condition, helping the investors to decide if they wish to proceed with the merger or an acquisition.

How can Mergers and Acquisition Advisors Prevent Companies from Over-Valuation?

The right way to get going on the M&A process is to hire an expert from a Merger and Acquisition services firm. Professional experts use modern-day and advanced tools to carry out a Financial Due Diligence of the target company in the pre-merger stage. A comprehensive financial due diligence review looks into the existing financial and legal aspects of the target company. Going further, M&A advisors evaluate the business risks that the acquiring company inherits from the target company. Experts also assess the synergies between the two companies and how things can work in the post-merger stage.

Experienced and seasoned advisors and consultants facilitates in an independent decision-making rather than supporting vested interest in the acquiring company. They are impartial to the entire scenario and work independently to help the acquiring company identify issues, delve into solutions, and finally take a call.

About Affility Consulting

Affility Consulting is a UAE-based Merger and Acquisition Advisor offering end-to-end advisory services. Thoroughly proficient in Financial Due Diligence, the company is an acknowledged leader in this niche. With an extensive know-how, the team offers out-of-the-box and innovative solutions and strategies that facilitates optimized decision-making. Being a prominent Mergers and Acquisition Specialist in the United Arab Emirates, Affility Consulting provides expert advice and consulting to business owners with goals of buying or selling a business.

Interested in becoming a sales mogul in 2021? Here’s all you need to know about an excellent opportunity with Isagenix…

If you are looking for a new venture in 2021, listen up! We have an exciting new opportunity for you, involving global leaders in network marketing and wellness, Isagenix.

This innovative market leader has been providing clients with the power to change their lifestyle, wellbeing, and personal health at the same time as growing financial wealth – for years now. They have ample experience in making sure your investments are working for you.

Five things to know about the Isagenix Business Opportunity

Before you rush off to invest, here are a few things you should know.

1 – Who are Isagenix?

You might never have had a networking opportunity like this – but now is your chance to thrive. Isagenix started life in the US and Australia and incorporates a brand of products focused on the health and wellbeing of the individual. Clients have access to an excellent scheme of support, with help centres in origin countries and all the product information, corporate literature, and branding access, that you could hope for.

2 -What is the Isagenix Business Opportunity?

The Isagenix plan lets you generate additional income for yourself. Unlike joining other sales schemes, Isagenix pay you proportionately for how your area performs. So, if you don’t sell anything one week but everyone else in your country (England, Wales, Northern Ireland or Scotland) does, then you earn some of that revenue anyway. This way, if everyone is performing on target, you can earn substantially more than you calculate for yourself.

3 – It’s Collaborative!

Since all the adverts for the business uses the same branding in one location, this spreads the work out, drawing everyone together to work co-operatively. Imagine a customer calls you from Inverness and you are working in Glasgow. You can collaborate with the northern branch of Isagenix to bring the client the wellness products that they need. It’s an all for one and one for all situations.

4 – You can make Big Bucks

This might sound like it operates using small change, but it isn’t true. The Isagenix business opportunity has created thousands of jobs across multiple nations. Better yet, it has created millionaires of its own. If you are willing to work for it and can apply yourself to the position, then you stand to increase your income exponentially.

5 – You can check before you invest

With thousands of us working from home dure to Covid-19, now is the chance you have been waiting for to branch out on your own. Thousands of people before you have gone on to put a little trust in Isagenix and made their fortune… perhaps you could be next.

If you still aren’t sure, however, why not head over to their pages and check out the business opportunity for yourself. It is guaranteed to help you setup as a fitness advisor, coach, or health instructor. The Isagenix diet and exercise regime has gained international acclaim as a healthy, successful way to lose weight and get fit. If you don’t like the idea of the brand, you should at least investigate the product range.

Isagenix Products are world renowned

As a participant in the Isagenix diet and exercise provision scheme, you will be given permission to sell their unique diet and exercise products. The Isagenix range is tailored towards weight loss, diet, and exercise. It focuses on creating a healthier way of living to its customers.

As a consumer, you can try these products for yourself before you start recommending them to fitness clients. However, when you are gaining profits for every sale made in your region, that makes for a good enough reason to get involved.

No one promised that Brexit would be smooth sailing, that’s for sure. However, few political commentators had expected this divorce to be accompanied by so many discords. With the dynamics of the past months being the way they were, one can’t help but wonder whether it would be smart for British businesspeople today to minimise ties with their European counterparts (and vice versa). In other words, would it not be best for the United Kingdom seller to focus on local and national commerce, instead of being exposed to ricochets from this international feud?

Let’s try to answer that question. We’ll look at some of the reasons Brexit has taken this path, in order to try and understand if things are going to get better or worse in the near future. In the process, we’ll also try to understand the alternative at the disposal of those Brits who just cannot afford to give up interactions with mainland Europe.

How Brexit took a wrong turn

Even back in 2016, when the referendum over Brexit was held, it was obvious that the process wouldn’t be simple, due to the complexity of ties between the EU and the UK. However, many analysts are certain that negotiations could have been handled much more effectively.

The fact that the UK had been politically turbulent during the time it took to strike a Brexit deal, with two election systems and three changes of leadership, certainly did not help. With the inability to even put together a list of offers and conditions on the British side and approve it by parliament, it’s no wonder the official parting date was postponed several times.

As if that wasn’t enough, enter COVID-19 into the heat of Brexit talks. With economies shrinking and thus becoming more protective, talking about a sustainable trade deal was next to impossible, so it’s no wonder that not everything that had been agreed upon, even stood the test of reality. The recent rumble over AstraZeneca vaccine doses is the perfect example of that.

Where are we headed?

On one hand, almost everyone agrees that things do not look good. The sour taste in the mouths of people on both sides will probably make it hard for policy makers to facilitate commerce, even after this COVID-19 crisis is behind us. On the other hand, in today’s economic reality, trying to resist any form of globalization is both futile and counterproductive.

Another reason for optimism, at least on the British side, is the leniency shown by the EU. If you look at the number of times the Union had agreed to postpone Brexit, in order to execute it in an orderly fashion, you can see that the people in Brussels like to flex their muscles sometimes but at the end of the day, have not taken operative measures and sanctions against the UK (so far).

All in all, it seems like financial connections with the EU are still a plausible option for Brits. However, people need to be prepared for rough times, especially until things get back on track pandemic-wise. Just like most elements of daily life have found a way to adjust to the virus, commerce relations can do the same, mainly via the internet.

The wonders of the World Wide Web

If you are a business owner and the thought of the troubles between the EU and the UK are depriving you of sleep hours, fear not. There are ways you can overcome any trade and commerce barrier, should it arise. One of the most prominent ways is moving most of your business online, including sales, service and marketing. For a glimpse at this phenomenon, we’ll take a look at Crystalead, a digital market firm operating worldwide and providing campaigning services for businesses.

Jonathan Greenwood from Crystalead told us that a substantial shift to online trade is already being felt across the continent. “Naturally, we work with a lot of European businesses and advertisers, and we’re feeling a sharp rise in activity ever since Brexit’s finalisation. It’s not just about demand for services, it’s about a quest for outside-the-box solutions to advertising-related issues, relevant to today’s reality.”

True, this is not a magical cure for all the problems bothering business owners. However, it can help solve a lot of bureaucracy-related annoyances and adapt to ever-changing regulations and policies. “The massive shift to the virtual world is inevitable in this sense,” summed up Greenwood, “and the whole Brexit issue just gave it a push.”