Options

Options

Once a multinational corporation has decided to divest a subsidiary, for whatever reason (e.g., a change of corporate strategy, returning to one’s core business, under-performance of the subsidiary, etc.), the one common factor in most divestitures, is that the board of directors would usually like it to happen yesterday.

If the Target Company to be divested is located in Spain, there are several options normally available to the seller: trying to sell the company using its own in-house resources; naming a professional Mergers and Acquisitions Advisor located in one’s own country; utilising one’s already-retained international investment bank or auditing firm; or naming a Spanish-based M & A advisor.

In-House Efforts

Unless the divesting company has an experienced in-house Corporate Finance department, this “Do-It-Yourself” option is usually quite time consuming and normally, never leads anywhere.

If the divesting company does indeed have an experienced in-house Corporate Finance department, then unless it is located in Spain, it frequently does not have the language capabilities, nor the local market knowledge, nor culture to present the Target to all qualified local buyers. Therefore, even though this department may contain some quite experienced deal doers, this effort usually does not achieve the board’s price expectations, nor its timing requirements.

Own Country-Based Advisors

Naming a Mergers and Acquisitions Advisor located in one’s own country normally suffers from many of the same weaknesses itemised above, lack of languages, local market knowledge and culture.

Investment Banks

If the divesting company already retains one of the major international banks as advisors for most of its financial affairs, the natural temptation is to ask them to assist in the divestiture of the Spanish subsidiary. Unfortunately, unless the Spanish Target is of a sufficient size (i.e., with an expected transaction value exceeding €uros 100 Million), it is doubtful that one can get the bank’s full attention. If it does (reluctantly) decide to accept the assignment, it frequently is a half-hearted effort, staffed by some juniors. Finally, one can be sure that the up-front monthly retainers and the eventual Success Fee, will almost certainly be substantially more than those charged by a local Spanish Mergers and Acquisitions advisory firm.

Auditing Firms

It is also quite tempting to name the Spanish office of ones normal auditing firm to assist with the divestiture. Whilst they would indeed possess the language capabilities, local market knowledge and culture; in the final analysis, they are accountants, not deal doers.

Spanish-Based Advisors

To obviate the problems itemised above, the optimum solution is to name a locally based, experienced, M & A Advisory Firm specialised in Middle-Market Cross-Border Deals.