Why you need an advisor when selling agribusiness. Interview of the CEO of the Investment Company INTELEVRAZ for the magazine “LANDLORD”

Iurii Diachuk, CEO of the Investment Company INTELEVRAZ

What are the main difficulties in selling agribusiness, why it is worth involving an advisor in this process and what support he can provide to the owner of the asset – in the advice of the CEO of Investment Company INTELEVRAZ Iurii Diachuk.

M&A deals in the agricultural sector are less common compared to some other businesses, and significant mergers and acquisitions of tens of millions of dollars can generally be counted on the fingers of one hand.
But the total number of deals is growing and will continue to grow, as agriculture has now become the leading sector of the economy with a share of 18% of GDP.
Starting your own business, planning profitable investments in the agricultural sector in Ukraine is becoming increasingly difficult.
High investment risks, lack of well-prepared offers for acquisition, misunderstanding of market trends and distortion of information hinder the formation of an attractive investment climate in the agricultural market of Ukraine.
However, this industry is currently one of the most profitable. Even in developed markets, for the purchase and sale of business owners attract professionals who are able to conduct all stages of the transaction.
It is clear that involving an advisor in the sale of agribusiness is better than doing everything yourself.
But what exactly are the benefits of hiring an advisor when looking for buyers and concluding an M&A agreement? Consider only the main ones.

What does the advisor do
In a broad sense, the advisor provides support for the agreement and compliance with the interests of all stakeholders – both sellers and buyers of the business, namely:
• estimates the value of agricultural assets of enterprises;
• searches for buyers of agricultural enterprises or other agricultural assets;
• accompanies and structures agreements at all stages – from the beginning of negotiations to the end;
• organizes the work process of all parties to the agreement, including consultants and representatives of the parties, in order to successfully complete transactions.
In other words, the advisor becomes the manager of all the processes that accompany the agreement. Thus, its functions include assisting in the development of strategy and participation in negotiations in the interests of the client, advising on all issues on the optimal structure of agreements and, finally, assistance in preparing the documentation necessary for the successful conclusion of the agreement with lawyers and other professionals involved in the process.

Pricing and preparation for sale
The first step in selling is to determine the true value of the business. An advisor who is an independent expert will be able to evaluate the company objectively. Unlike interested owners, he can evaluate the business with the eyes of the buyer, which will help determine its fair market value.
An independent advisor will provide recommendations on how to conduct a financial analysis of the company and, in fact, will help to do it well. For example, certain difficulties usually arise when conducting an inventory of assets, especially when the company has extensive activities.
In addition, the function of the advisor, such as conducting an audit of the land bank, should be mentioned separately.
First, as practice shows, often the owners and managers of the enterprise do not have complete systematic information about the state of affairs in this matter. Share lease agreements are kept in paper form for different periods and are not entered in a single electronic register, part of the land is processed by the company under oral agreements, etc.
Second, the opening of the land market, which will take place in two stages during 2021-2024, will radically change the value of this asset. Even leased plots become a valuable asset given the priority right of tenants to purchase land for sale.
Therefore, the advisor will prepare the company and assets for sale so that the value of the company is as high as possible.

Customer search support
The second stage of the advisor’s work is, relatively speaking, the creation of demand for the asset offered for sale. You need to identify potential investors and competently form an offer. That is, there are three components: direct identification of interested investors, preparation of presentation materials and presentations of the proposed asset.
The peculiarity is that at this stage the name of the company and any information that may indicate the company is not disclosed.
If the presentations are of practical interest, the advisor will enter into confidentiality agreements with stakeholders to prevent industrial espionage and raiding. And after that they will be given all the necessary information to study.
Completion of the search for buyers is to obtain indicative price proposals from interested parties, analysis of information and preparation of appropriate comments and recommendations for the owners of the business for sale.

Support of concluding the agreement 
Only after that the work of the sales adviser comes to an end – directly to the support of the conclusion of the agreement. He makes a kind of presentation for potential customers – examines both the proposals themselves and the business reputation of potential investors (because transactions can be long in time).
Such information is especially needed when two or more offers have been received and the best one needs to be identified, taking into account the reputation of the investors. In addition, under such conditions, the advisor will try to increase the cost of sales.
Finally, at the final stage of support, the functions of the advisor include assistance in the tax structuring of the agreement.
Business owners who have decided to sell their assets should remember that attracting professional M&A consulting in today’s market is not a whim, but a guarantee of security of the transaction and getting the best price.

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