M&A deals at various stages of development of the business:
Following are the various stages of development of a business:
Pre-incorporation:
Pre incorporation activities are typically financed by the promoters’ own funds. This typically includes the incorporation expenses, expenses for market study, feasibility study, detailed project report, and mobilization of investors.
Proof of concept:
When a new company is able to design and manufacture a product and also is able to profitable is cell in the market at the desired scale aur volume, it is called proof of concept. Before the proof of concept, angel investors provide funds. After the proof of concept, venture capital investors provide the funds.
Before break-even:
When our company reaches a break even, i.e. It recover the entire capital expense and also makes revenues more than the running cost, it is said to have reached break even. The risk Perception of a company is relatively very high before break even.
After break-even:
Beyond the point of break even, company start making profits. At this stage, the issue of equity of a potent company can command a premium even on the traditional investment criteria.
Exponential growth phase:
Depending upon the nature of the business, a company witnesses exponential growth in the volumes of sale. In this phase the valuation of the company is most favourable to the promoters.
Stable growth:
After the phase of exponential growth, the company starts growing at a normal rate. It is relatively easier to to carry out systematic valuation of a company in this stage.
No growth:
When the product and market saturate either with competition are by tapping all possible market, the company’s revenues get stabilized except for increase due to inflation.
Decline phase:
When the products or the services of the company become obsolete, and if the management of the company is not able to do restructuring with the business model, the companies revenues and profits start declining.
Revamping or refurbishment:
A company may be relevant to the market in terms of what products it manufactures. However, the way the company operates, the way the company manufactures, the way the company uses raw materials, the kind of technology the company uses might be no more in vogue. This may result in decline of the revenues or profits of the company. In such case investment can be done in the company for refurbishment, revamping, modernization, digitisation, etc.
Business Turnaround:
A company could be doing well financially in the past, but due to two adverse trends in the market for some unfortunate events in the sector are specifically for the company main give a major blow to its stability, liquidity, profitability, scale of operation, ability to repay loans, manage suppliers, take care of inflation, etc. If such company is provided with one time capital to come back to the original normal way of operations, it is called turnaround funding.
Apohan understands the phases of the business in its life cycle very well. Apohan assists its client in securing equity fund at every stage of its life as it has experts’ understanding of the specific issues in each phase. Apohan manages the transaction right from the problem identification phase, to the closure of deal with perfection.