Inorganic growth can provide a much-needed boost to a company’s capabilities. However, India can be a challenging environment for concluding deals involving mergers, acquisitions and joint ventures, making it essential for such deals to be handled with great care and expertise. Investors must evaluate the accounting, tax, regulatory, legal, management and cultural aspects of the target company. While investors would like to have complete and accurate information to make critical decisions, such information is not readily available and is often difficult to evaluate. The success of a deal may hinge on the ability to discover and analyse the missing pieces. On-the-ground knowledge greatly improves the probability of a deal’s proper execution and success.
SKP’s holistic approach to Transaction Advisory comes from a thorough understanding of ground realities. We understand that it is not merely individual activities such as target identification or due diligence that determine the success of a transaction, but it is how such activities are collectively managed as a project. Our team is involved at every stage of the process followed by post-transaction hand-holding until our client is ready for the final handover. We work as project managers with our goal being the success of your business and its continued growth. We don’t work just as your advisers or consultants but more as your “Implementation Partners”.
While trying to grow via the inorganic route, one of the greatest impediments to a successful transaction is failing to identify the correct partner. We believe that successful deals are those that result in a win-win situation for both the entities involved. With this end in mind, we assist our clients in assessing the strategic fit of a business by evaluating potential synergies, and identifying suitable partners or targets that would help achieve your long-term business objectives.
Our Deal Advisory team assists in transactions with various objectives such as mergers and acquisitions, joint ventures, management buyouts, divestitures, spin-offs and strategic alliances.
Even successful M&A transactions may have undergone difficulties at various stages. During the engagement process, we understand the possible issues that could lead to an unsuccessful deal and see how to prevent such deal breakers.
We conduct rigorous research and analyses to find the best fit. Our process includes:
- Understanding the client’s business and needs
- Providing a high-level market overview
- Conducting a deep dive analysis of shortlisted companies
- Providing decision-making, negotiation and legal/regulatory assistance
Our strong association with international trade bodies and networks across Europe, Asia and USA gives us a strategic edge. We work closely with various trade bodies in India as well.
Buying an existing business is the easiest way to get a head start in developing your market and growing your company. Cross-border M&As are a critical aspect of market development. When it comes to buying a business, it is critical to understand which aspects require the most time and attention; being well prepared will improve the quality of the transaction.
Our comprehensive services ensure that our clients do not make critical mistakes. At SKP, we help assess the business potential and focus on the underlying factors that lead to a successful acquisition. We help you decide your target market and screening criteria, identify the key value drivers and valuation range of your targets, understand how to structure the capital inflow, and maximise closure probability and expedite the buying process. In doing so, due consideration is given to cultural, legal, commercial, tax and exchange control aspects.
The SKP Approach
- Understand the business potential and develop screening criteria
- Screen targets
- Strategic evaluation of targets and initial feedback
- Initiate discussions between the buyer and seller
- Execution of the transaction and final handshake
- Smooth transaction closure
When you are looking to sell or divest your business, an adviser who knows the selling process thoroughly and understands the implications on your business is a key link. Our M&A advisers prioritise your objective for sale or divestment and structure the process accordingly. We are familiar with the costs, legal aspects, types of buyers and all other aspects concerning a sale.
We ensure that we convey your business potential and unique characteristics fittingly to potential buyers. In positioning your business, we consider the revenue synergies for the buyer and seek to maximise closure probability and expedite the sale process.
The SKP Approach
- Convey business potential to buyers
- Assess business value
- Screen and approach potential buyers
- Maximise deal closure probability
- Prepare seller for the sale
- Facilitate/coordinate for transactions and ensure timely closure
Our Due Diligence services help investors or sellers of a business identify the financial, business and sector-specific risks associated with a transaction. Effective due diligence is a must if parties are to be spared the enormous loss of time, money and reputation from deals that fail to meet expectations. At SKP, our focus lies on providing a holistic view beyond simple accounting analysis. The financial and tax due diligence process commences with defining the scope where we engage with the management to have a thorough understanding of the objectives of the proposed transaction. Once the scope is defined, field work commences.
Our approach while conducting due diligence for Buy Side, Sell Side and Vendor Support transactions is as follows:
- Thoroughly understand the target entity’s business and provide insights on their operations
- Extensively assess the risk profile of the target and its industry with respect to your investment objectives
- Identify potential deal breakers
- Identify and quantify the tax exposure in terms of hidden cost, contingencies and commitments
- Showcase the strengths and weaknesses in the company’ financials. We assist in capitalising on potential synergies arising from the proposed/underlying transaction.
Commercial Due Diligence
We assist you in objectively identifying a suitable target market and partner, and assessing whether the target can successfully help you achieve your long-term goals. For this, we conduct a review based on the industry, market and business models of companies. Some aspects of a commercial due diligence include:
- Industry Analysis: Actual and potential market size, market profitability, value chain analysis, trends and development, key success factors
- Competitor Analysis: Competitor identification, understanding their objectives, strategies, cost structure, positioning, strengths and weaknesses
- Customer Analysis: Customer segmentation, growth drivers in the customer base, pricing, products, customer feedback, customer planning, etc.
- Internal Analysis: Understanding resources and capabilities
Financial Due Diligence
Buying a Business
We help buyers confidently navigate the complexities of buying a business, unlocking value at every stage. Besides the overall investment objectives, our due diligence approach also addresses the following questions weighing on an investor’s mind:
- Is the business suitably structured for your growth plans, or will you need to change the structure?
- Can there be any objections/hurdles from various stakeholders of the company including the regulators, following conclusion of the deal?
- Is the company’s customer base diversified and growing?
- Are there any expectations with respect to a major loss in the customer base in case the deal is concluded?
- Are the forecasted activities of the business in line with historical growth?
- Is the company adequately equipped in terms of available resources and operational capacity for forecasted growth?
- Has the company faced any major issues/litigations either from its suppliers or customers?
- What are the major contingent/unaccounted liabilities of the company?
- Are a sustainable margin and quality of assets of the business shown by the company?
- Has the business been adequately valued? We would also highlight the key items impacting the purchase price consideration.
- Does the company operate under a high operating cycle for running its day-to-day business activities?
Selling a Business
When contemplating the sale of your business, you must ensure that your side of the due diligence has been handled correctly, considering (but not limited to) the earlier-mentioned objectives, in order to avoid disputes and costly litigations from the potential buyer.
The price that buyers agree to pay is dependent on the company’s performance, and any blips in the interim financial statements can reduce the value. By exposing potential concerns in advance, we can help avoid issues that would adversely impact the value of your business and often lead to purchase price disputes during the deal negotiation phase.
Buyers will inevitably request to see many documents, review inventory, inspect the facility and equipment, and scrutinise the financials. As a seller, you must be prepared and should also explore probable deal breakers. To ensure smooth day-to-day operations and successful closure of the transaction, it is important to have a team of professionals who can help you streamline the deal process during this critical period.
With our professional experience and industry expertise, we can help you with the following:
- Identify areas of improvement and issues impacting the deal, even before initiating the partner search
- Highlight potential deal breakers
- Assist in rendering the company fit for sale
- Select appropriate information to be provided to the purchaser
- Prepare the data room and due diligence documents
- Identify potential liabilities that the future investor may have as a result of past non-compliances under tax regulations.
Tax Due Diligence
An evaluation of your target’s current tax position as well as the tax implication of the transaction is necessary to identify potential exposures/issues. Tax structures vary across industry segments that may each have a different tax-risk profile. We identify and understand these requirements and provide an optimal financial and tax structure to mitigate these risks.
At SKP, we provide expert advisory services that will highlight the risk and tax exposure in the deal by addressing the following key concerns:
- Has the company complied with all applicable tax laws such as income tax, Value Added Tax, service tax, excise duty, etc.?
- What could the potential exposure to the company be, post investment, for any non-compliance in the past?
- What are the major ongoing litigations within the company with various tax authorities?
- We can help you understand the modus operandi with respect to pending tax appeals/assessments and quantify the exposure, if the case is decided against the target company.
- What are the grounds of appeal based on which the company/tax department has filed the case with appellant authorities? We assist in identifying the risk exposure involved based on the current law of the land.
- We highlight the potential financial exposure due to pending matters in tax appeals. We also help quantify the risk by extrapolating it to subsequent years where a similar situation exists, for which tax assessments are yet to be done.
With the continuous revision of tax and legal doctrines, and in-depth scrutiny of corporate transactions by tax and regulatory authorities, we specialise in Valuation services that integrate accounting, financial reporting, tax planning, corporate transactions and regulatory compliances. We personalise our services with a focus on understanding the needs of the client, the transactions involved and the perimeter of valuation.
Our services include:
- Corporate transactions: We have extensive experience across several industries and are well versed with the techniques required for complex corporate assignments.
- Portfolio Companies (SEBI-registered AIFs): Under the SEBI (Alternate Investment Funds) Regulations, 2012, valuation of Category I and Category II AIF investments need to be performed at least once in six months.
- Regulatory requirements: Such valuation may be for the purpose of compliance with:
- Foreign Exchange Management Act (FEMA)
- Companies Act, 2013
- Rule 11 UA of the Income Tax Rules, 1962
- Swap certificates
- Overseas Direct Investment (ODI) guidelines
- Alternate Investment Fund (AIF) regulations
- Valuation of Intangibles: We also provide valuation support for intangibles such as the assessment of brand value, patents, trademarks, copyrights, goodwill, etc. Our services can help with:
- Financial reporting
- Transfer pricing matters
- Licensing agreements
- Mergers and acquisitions
- Financial transactions
For more information on our valuation services, please write to us at email@example.com.
We assist our clients in designing an optimal transaction structure taking into account the potential taxation, regulatory and capital structuring implications. We also handle any complexities that may occur during the execution of the transaction. We support different forms of entities in their opportunities for mergers, acquisitions, joint ventures, strategic alliances, demergers, divestment and reorganisation.
We have extensive experience in compliance under various Indian statutes viz. direct and indirect taxes, FEMA regulations and corporate laws. With our team of experts, we are capable of creating an efficient structure and ensure that our clients mitigate financial and legal risks.
The structure of a transaction can be complicated; while a particular structure may be beneficial for one party, it may not work for another. Therefore, identifying the best structure to consummate the transaction is critical. In our approach to transaction structuring, understanding client expectations before suggesting the optimal deal structure is our priority.
Transaction structuring would largely involve matters that impact the company’s capital structure, deal structure, tax considerations and regulatory framework. Based on our client’s requirements, our offerings are as follows:
- Capital Structuring: Source of finance such as debt, equity, bridge loan, ECBs, etc.
- Tax Structuring: Deciding on an optimal structure that is tax-efficient across jurisdictions
- Deal Structure: Mode of transaction that includes decision-making on slump sale, asset sale or share purchase
- Regulatory Advisory: Considering FEMA, company law and other related legal issues while deciding on an optimal structure
In this process, our approach will be as follows:
- Understand the primary objectives of the parties involved in the transaction
- Implement an efficient way of sharing risks collectively by both the parties to create a win-win situation
- Determine the high-level/critical issues impacting the transaction as a whole
- Prioritise the critical issues affecting both parties in order to optimise the structure
- Evaluate deals already executed in the past and provide appropriate recommendations
- Evaluate other available alternatives over the suggested deal structure considering the above parameters.
Growing opportunities for foreign direct investment and strategic alliances in India have increased the need for transaction advisory and restructuring services. Constant examination of your business practices and structures is necessary to ensure continual improvement, essential to flourish in today’s dynamic world. At SKP, we ensure that your company is operating in the most efficient manner, not merely from a tax point of view, but more importantly, from the overall business perspective.
The need for restructuring may arise from various external and internal factors.
External factors could include:
- Business expansion (mergers, acquisitions, and joint ventures)
- Business divestment (demerger or stake sale)
- Higher returns for business through disposal of non-core assets (itemised sale, slump sale, demerger)
Internal factors could include:
- Enhancing business performance
- Tax planning
- Consolidation/separation of the business
- Unlocking the value of the business
- Family business reorganisation – division/dispute resolution/succession
- Profit repatriation
- Business closure/winding up
At SKP, we provide a complete suite of financial and strategic advisory services in a manner that helps you drive transactions in the most efficient and effective way. While working as your partner, the SKP approach is that of a Project Manager providing an end-to-end solution. Right from the planning phase to the implementation and post-implementation phase, we are involved throughout the life cycle of the transaction.
We can help your business with the following:
- Advise on the most favourable holding company jurisdiction
- Choose the entity for carrying out business in India
- Identify optimal capital structures and financing strategies i.e. debt vs equity to ensure quicker and tax-efficient repatriation of funds
- Ensure that the restructuring is compliant with all regulations
- Assist in planning, scheduling and monitoring the restructuring programme (capital reduction, buyback of shares, dividend option, reorganisation/structuring of capital, conversion of entity, etc.)
- Identify and resolve legal issues with the help of lawyers
- Liaise with regulatory authorities
- Identify and implement the most suitable form of business closure (member’s voluntary winding up, fast track exit/deregistration, winding up by court, creditor’s voluntary winding up).