It started in 2010 with Ringsvets AB, a engineering company just north of Örebro, 29 employees and about 8 MSEK in EBIT, the company was bought by Hans Lager, former Nordic manager for UBS – until recently Norrköping-based Re-board Technology AB, manufacturer of paper-based board materials, with about 50 employees bought by the investment company Karnell.
When we look back on these 10 years and the almost 100 projects we have completed, there is one thing that is certain: Selling your company today, 2020, is something completely different than it was in 2010.
New types of buyers today. An important difference is the growth of all “smaller” investment and venture capital companies. In 2010, there were very few such players who acquired companies with SEK 5 to 10 million in EBIT. It is no coincidence that our first sales assignment, Ringsvets, was sold to a private individual and that the latest Re-board Technology, to an investment company.
Today, we have just over 100 investment and venture capital companies in our network and they are increasing every month. Thanks to our network, it is much easier for us today to find the right type of buyer compared to ten years ago. Of course, this also means that you as a seller get paid significantly better when the matching is perfect.
The process of acquiring a company also looks different today than 10 years ago. In 2010, it was not uncommon to meet buyers who had no adviser with them, or at best a lone lawyer or accountant. Today, buyers often bring with them large teams of advisors. Many buyers, especially the financial ones, often have people who have previously worked with significantly larger deals, for example at EQT, IK or Nordic Capital, and who take the process with them from the larger deals. It is not uncommon for buyers today to be accompanied by a team of between 10 and 20 advisers, including lawyers, accountants, tax advisers and other specialists. This places higher demands on both us as advisors and on our sales staff. Careful and well-thought-out preparations are therefore a must.
We also feel that the focus in the business has shifted. The time that a buyer spends analyzing the market, market position and future opportunities as well as working out an updated business plan is significantly greater today than 10 years ago. Put simply, it can be said that 10 years ago it was more about being able to verify historical results, while today it is much more about being able to describe future potential. This places greater demands on us to, for example, present and validate opportunities for development, growth and future goals in an information memorandum. Many buyers wish to carry out “platform acquisitions”, ie acquire companies to which further acquisitions can be made. At the same time, we experience this aspiration rather as a wish and that in reality the majority of buyers are set on future growth taking place organically.
The risk appetite has changed over the years. It can be said that it was low in 2010, shortly after the financial crisis to be high around 2015/2016. Today, 2020, it’s back somewhere in between. The corona pandemic has not dampened our activity in the spring of 2020, for which we are extremely grateful, and in the dialogue with potential buyers, the current pandemic is not seen as an obstacle to making acquisitions in the autumn of 2020. Most expect a vaccine to be available in 2021. For some industries, such as the food industry where we conducted a deal during the summer of 2020, the pandemic has even had a positive effect.
The opportunities for a buyer to finance their acquisition by loan follow the same curve as risk appetite. We feel that the banks now in 2020 have a great deal of interest in terms of acquisition financing, but that in the wake of the Corona pandemic, the process of getting the financing in place takes longer today than it did, for example, a year ago. Acquisition financing is normally given at between 40 to 50 percent of the purchase price and the interest cost on the acquisition loans is usually between 3 and 4 percent with an amortization requirement of 5 years. Going back to 2015, we saw acquisition financing of up to 70% of the purchase price.
We also see how megatrends such as sustainability, the pursuit of a circular society and digitalisation and IoT are of great importance to which companies’ buyers show interest. We see this especially in the young technology companies that we have had the privilege of working with, where there is great interest from investors and from industrial players.
For those who are thinking of selling their company, it is an important part of the strategic work to position their company correctly based on such aspects.
10 years have passed since the start of Paulmarken Holmberg (then with the name ARD). It has been 10 fantastically fun and exciting years. We look forward to 10 more years, and that in 2030 we will be able to write another short chronicle of the 20s!
Finally, we would like to say a big thank you to all our customers, partners, counterparties and others for these 10 years.
Therese Paulmarken & Marcus Holmberg