How Existing Relationships Add Value to a Transaction

When engaging in either a sell or buy-side corporate restructuring, one necessary topic to explore is how existing relationships can benefit the transaction.

Utilities Providers: 

  •   Purchasers can leverage existing contracts to justify offer price, just as a seller can use them to justify listing price.

§  The buyer can use these contracts if they’re lucrative, or if they’re not can use them to devalue the overall cost unless amended.

§  Make sure you look into whether contracts are transferable or not, and when their term expires.

Vendors: (Consumables, Raw Materials, Logistics, etc)

  • Divesting company can make introductions and can help negotiate new contracts, or honor old ones.
  • There may be some intricacies pertaining to contracts whether the new company is retaining the name/title or if they’re changing to a different company altogether.

Existing Customer Base:

  • If the divesting company is getting out of the specific process, they can transfer the current customer base over by making introductions.
  • The divesting company can increase value by showing projected revenues, or helping secure LOIs. This is especially easy in a management buy-out or spin-off scenario.

If you’re currently engaged in, or planning to begin, a carve out or acquisition, please reach out to us.  We’ll be glad to let you know how FabExchange can either increase your ROI in a divestment or ensure you get the most out of the next business unit you acquire.

Dmitrius Garcia & Shaun Flynn

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