Situation
The owner of a distribution company for a major European brand agreed to sell the business to its primary supplier. Although negotiations were successful, the seller approached us in the final stage when the Purchase and Sale Agreement (PSA) had already been prepared. The owner wanted assurance that the financial and legal terms would fully protect his interests and avoid potential losses after the transaction closure.

Challenges
1. Incorrect Price Calculation Formula
The PSA did not account for an adjustment to the standard level of working capital. Since the seller had purchased substantial inventory from the buyer before closing, this could have significantly reduced the transaction’s final price, resulting in considerable losses for the seller.
2. Ambiguities in the PSA and Risk of Settlement Delays
The transaction terms included a balance sheet adjustment on the closing date (Completion Accounts), but the vague definitions in the PSA could have led to disputes over the interpretation of financial indicators in the final transaction calculations.
3. Unclear Definitions of Key Elements
Several of the seller’s financial assets were excluded from the Net Debt determination and financial model/valuation used by the buyer.

Our Solution
1. Revised Price Calculation Formula
We proposed an adjustment to the standard level of working capital, factoring in the inventory purchased, which allowed the seller to avoid a price reduction.
2. Optimized Closing Mechanism
Though it was too late to change the transaction mechanism (ideally, a "Locked Box" method would have been recommended if we were involved earlier), we helped the seller clarify definitions and the settlement process for the closing date in the PSA to minimize potential disputes.
3. Clarified Terms and Conditions in the PSA
We conducted a high-level review and proposed additional adjustments to Net Debt, resulting in a 1,8 million dollars reduction in this indicator.

Results
1. Prevented Financial Losses
The adjustments to the price calculation formula and inclusion of net working capital prevented losses exceeding 250 thousand dollars.
2. Reduced Final Settlement Time
The precise formulation of PSA terms increased transparency and trust, expediting final settlement timelines..
3. Increased Transaction Value
Incorporating previously omitted financial assets resulted in a significant increase in transaction value by reducing Net Debt.

Conclusion
This case demonstrates the potential risks business owners face in selling their companies. Engaging professional consultants early in the transaction process helps mitigate financial risks and enhances confidence in successful deal completion.

Situation
The owner of a manufacturing company (hereinafter referred to as the "Seller") decided to sell the business, which included the main division producing industrial equipment and a non-core division engaged in the production of consumer goods. Despite the company's strong financial performance, potential buyers expressed concerns about managing the non-core asset, which could complicate the business valuation and reduce the number of interested investors.

Challenges
1. Complex Business Structure
The presence of a non-core division involved in the production of consumer goods created challenges in valuing the company, as investors were focused on the core business, while the non-core asset was viewed as a distraction, complicating the management of the business.
2. Lower Valuation of the Business as a Whole
Potential buyers considered the management risk associated with the non-core asset and adjusted their overall valuation of the company downward, which was unacceptable to the Seller.
3. Optimization of the Deal Structure
There was a need to carve out the non-core division and sell it separately in order to streamline the structure of the core business and make it more attractive to strategic investors.

Our Solution
1. Analysis and Carve-Out of Non-Core Business
We conducted a detailed analysis of all the company’s assets and separated the non-core division (producing consumer goods) into a standalone entity (“carve-out”). This allowed us to simplify the business structure and make the financial metrics of the core business more transparent.
2. Sale of the Non-Core Asset
We facilitated the sale of the non-core division as a separate business. A project was presented to interested buyers for acquiring the assets with potential for future growth. The sale was successfully completed, and the Seller received a significant sum, which was used to optimize the company’s debt structure and strengthen the financial position of the core business.
3. Sale of the "Clean" Core Business
After the sale of the non-core asset, we marketed the core business to strategic investors and financial funds. The simplified structure and improved financial metrics made the company more attractive. This enabled us to initiate a competitive bidding process among buyers, resulting in better deal terms.

Results
1. Increase in Total Sale Value
The total proceeds from the sale of the non-core asset and the core business were 35% higher than the initial offer for the company in its original structure.
2. Reduction in Time to Sell the Core Business
The sale of the "clean" company was completed more quickly, as investors were more interested in a clearly structured business without unnecessary assets.
3. Reduction in Debt Load
The proceeds from the sale of the non-core business allowed for an improvement in the company’s financial structure, positively impacting the final valuation and the deal terms.

Conclusions
This example clearly demonstrates how important it can be, during the sale of a company, to separate and sell non-core assets. Dividing the business into core and non-core assets helps to increase the company’s attractiveness to investors, improve its financial structure, and ultimately increase the transaction value. Engaging professional advisors during the deal preparation phase helps to mitigate potential risks and maximize the benefits of the sales process.

Situation
A manufacturing client sought assistance in finding a strategic partner to establish a joint venture. The partner was expected to provide investments and branded products, while the client offered a production site, sales network, brand, and favorable terms for localized production, including government relations (GR) resources. However, a non-core division located within the company’s facilities raised concerns.

Challenges
1. Non-Core Assets in Partnership Scope
The partner was not interested in the non-core assets, and their inclusion complicated the valuation and terms of contribution from both parties.
2. Comprehensive Due Diligence
The partner engaged a Big Four firm for thorough due diligence (financial, legal, and environmental), which extended the transaction timeline.
3. Delayed Asset Separation
The non-core asset separation took several months, slowing down negotiations. During this time, the company was subjected to sanctions, which ultimately led to the transaction’s cancellation at the regulatory approval stage.

Our Solution
1. Non-Core Asset Separation
We advised the client to initiate the separation of the non-core division early to streamline the business structure and enhance transparency for potential partners.
2. Due Diligence and Negotiation Support
We coordinated due diligence on behalf of our client and prepared a reasoned valuation position, reducing disagreements with the partner over asset values and collaboration terms.
3. Risk Management and Avoiding Delays
We provided recommendations for expediting asset separation and evaluated alternative transaction scenarios to manage risks.

Results
1. Enhanced Understanding of Transaction Readiness
This project underscored the importance of early preparation, asset separation, and detailed risk planning for future transactions.
2. Streamlined Business Structure and Optimized Negotiations
Despite the sanctions disrupting the deal, asset separation simplified future negotiations and increased business appeal to prospective partners.
3. Key Takeaway for Future Partnerships
Proactive preparation, including early asset separation and comprehensive risk mitigation, is critical for securing strategic partnerships.

Situation
The owners of a five-year-old company approached us intending to sell their business and focus on a new project. However, the company faced challenges, including opaque financial statements, unclear ownership contributions, and mixed personal and business expenses. Additionally, the company lacked a formal development strategy.

Challenges
1. Non-Transparent Financial Structure
Financial statements did not accurately reflect the company’s performance, with personal expenses and investments in the new project obscuring business finances.
2. Absence of Strategic Planning
Without a documented strategy, it was challenging to assess the business’s growth potential and viability.
3. Weak Negotiating Position
The lack of structure and strategy made the business appear risky, reducing the likelihood of a favorable sale.

Our Solution
1. Goal Alignment and Company Diagnosis
We met with the owners to clarify their objectives and conducted an expedited assessment of key business areas, including finance, production, marketing, and organizational management.
2. Strategic Planning Session with Owners
During a strategic session, we helped owners define their vision for both the current business and the new project, illustrating the investor’s perspective and discussing alternative growth scenarios.
3. Business Optimization with Top Management
We collaborated with the leadership team to optimize the business model and prepare for future growth, including:

• Separating the new project into an independent startup
• Preparing low-margin segments for sale to increase profitability in core areas
• Streamlining financial statements and restructuring assets for transparency
• Developing a comprehensive business strategy and information memorandum for investors

Results
1. Shifted Focus to Strategic Investor Attraction
After the strategic review, the owners decided to retain the business and pursue a strategic investor for continued growth.
2. Enhanced Structure and Transparency
The optimized business model and transparent reporting improved both operational efficiency and investor appeal.
3. Ongoing Negotiations with Multiple Investors
The company is currently negotiating with three potential investors, exploring various partnership structures and selecting the most favorable option for collaboration.