3 questions to smart minds

Value Creation in Deals — from Risk Minimization to Value Generation

For this 3 questions to Friederich von Hurter and Stefan Saalfrank

PWC Tran­sac­tions in Munich and Frank­furt a.M.
Photo: Frie­de­rich von Hurter
24. July 2019

Due dili­gence often raises high expec­ta­ti­ons, which are not always fulfil­led after the entry of a private equity house or corpo­ra­tes. Possi­ble conse­quen­ces: longer holding peri­ods, lower selling price and higher inte­rest rates — to name just a few. What are the oppor­tu­ni­ties for improvement?

For this 3 ques­ti­ons to Frie­de­rich von Hurter as well as Stefan Saal­frank; both part­ners at PWC Tran­sac­tions in Munich and Frank­furt a.M.

1. How to prepare a tran­sac­tion to increase the value of the company?

Saal­frank: Clas­si­cally, consul­tants are invol­ved in the prepa­ra­tion of sales proces­ses rela­tively late in the process, so that the envi­sa­ged time­line is usually given and there is little oppor­tu­nity to remedy facts that reduce value. Ideally, it should alre­ady be exami­ned and defi­ned during the holding period what company-speci­fic value drivers are, how these can be measu­red and, of course, also impro­ved. This allows a targe­ted equity story to be built and marke­ted in the sales process. This includes not only clas­si­cal finan­cial, but all areas of value creation.

2. How is this diffe­rent from tradi­tio­nal due diligence?

Von Hurter: We enter into a compre­hen­sive discus­sion with our clients that focu­ses on future equity value — in other words, a reali­stic, future enter­prise value. Of course, as Stefan mentio­ned, the finan­cial data is the start­ing point. In the value-focu­sed approach, howe­ver, the discus­sion is just getting star­ted here. Our approach iden­ti­fies value-crea­ting measu­res in terms of reve­nue and market deve­lo­p­ment, effi­ci­ency and profi­ta­bi­lity growth, and tax opti­miza­tion oppor­tu­ni­ties, among others. Only by working toge­ther can holi­stic approa­ches to incre­asing equity value be identified.

3. What compe­ten­cies are needed for a reali­stic assessment?

Saal­frank: The analy­tics of a clas­sic due dili­gence are important, coupled with expe­ri­ence from tran­sac­tions in a simi­lar indus­try and scale. In the past, this played a rather subor­di­nate role — but if you want to imple­ment value-enhan­cing measu­res as part of a finan­cial due dili­gence, a combi­na­tion of finan­cial and indus­try exper­tise is indispensable.

Von Hurter: The same applies to crea­ting a model by looking at measu­res rela­ted to sales and profi­ta­bi­lity. Here, too, expe­ri­ence in the rele­vant sector and the speci­fic company situa­tion plays an essen­tial role. This often requi­res the invol­vement of seve­ral experts on detailed topics. The coor­di­na­tion of the indi­vi­dual topics and the correct mapping during the due dili­gence phase beco­mes the core challenge.

Subscribe newsletter

Here you can read about the latest transactions, IPOs, private equity deals and venture capital investments, who has raised a new fund, how Buy & Build activities are going.

Get in touch

Contact us!
fyb [at]