Merger as an SMEs Strategy to Combat a Crisis
The biggest challenge would be to merge the complementary and synergistic SMEs as one. Most of them are not professionally managed and may not even have proper accounting. Engaging a boutique investment bank or perhaps a corporate finance experienced individual to drive the process might have a higher chance of putting a few SMEs together.
In this pandemic which is not going away soon, it is important for SMEs to look at the option of merger to be a stronger company to survive through this period. The selection of merger candidates is undoubtedly important as by merging 3-4 complementary SMEs will produce a more complete and stronger company.
Once there is a stronger, bigger and more complete company, it increases the possibility of raising funds from VC or PE and an exit either through IPO or trade sales is possible.
1. M&A of SME 10 June 2020 @2020 copyright. Proprietary and Confidential. All Rights Reserved. All information presented herein is the Intellectual Properties and copyrights of and Key ASIC Any Part or Whole of the Information in this Document shall not be copied, used or referenced without the Written Consent of Ucrest and Key ASIC (Stock Code: 0005) (Stock Code: 0143)
8. M&A Deal Structure ✓ Buying of Shares ✓ Buying of Assets ✓ Merger 11/6/2020 Copyright of UCrest Berhad, Private and Confidential 8
13. Successful Model • 5 - 10 specialist centers merged into a bigger specialist group • Operate for 2 - 3 year, and EXIT (IPO or trade sales) 11/6/2020 Copyright of UCrest Berhad, Private and Confidential 13
4. What is M&A? 11/6/2020 Copyright of UCrest Berhad, Private and Confidential 4 M&A = MERGER & ACQUISITION ✓ Consolidation of companies or assets through various types of financial transaction MERGER ✓ A corporate strategy of combining two separate entities into a Singapore company ACQUISITION ✓ The purchase of all or a portion of a corporate asset or target company
12. Success Story 11/6/2020 Copyright of UCrest Berhad, Private and Confidential 12 Google and Android: In 2005, Google acquired Android for an estimated $50 million. At the time of the deal, Android was an unknown mobile startup company. The move made it possible for Google to compete in a market owned by Microsoft with Windows Mobile and Apple’s iPhone. The acquisition is widely considered a success and over half, 54.5 percent, of U.S. smartphone subscribers use a Google Android device as of May 2018.
9. M&A Problems and Challenges • Shareholders want control but pay little or no money • Owners of company are looking “merger” candidates only when the company is in financial difficulty • Valuation gaps • Commit to deliver Financial Target for next 5 years • Ego 11/6/2020 Copyright of UCrest Berhad, Private and Confidential 9
5. Synergy 11/6/2020 Copyright of UCrest Berhad, Private and Confidential 5 Vertical Concentric Horizontal Conglomerate Competitors Customer - Supplier Different Products Same Customers (Complimentary) Different Products Different Customers
10. Valuation • Discounted Cash Flow Analysis • Capitalization of Earnings Method • EBITDA Multiple • Revenue Multiple • Precedent Transactions • Book Value/Liquidation Value • Real Option Analysis 11/6/2020 Copyright of UCrest Berhad, Private and Confidential 10
6. Why M&A? ✓ Grow market share / Expansion of market ✓ Eliminate competitor ✓ Supply chain pricing power ✓ Technologies/Skills ✓ Diversification ✓ Strengthen Financial ✓ Economy of Scale ✓ Acquisition into new Opportunities 11/6/2020 Copyright of UCrest Berhad, Private and Confidential 6
7. M&A Process • Develop an M&A Strategy • Identify Target Candidates • Contact Targets • Perform Valuation Analysis • Negotiation • Conduct Due Diligence • Execute the Transaction • Integration 11/6/2020 Copyright of UCrest Berhad, Private and Confidential 7
11. Why M&A Fails? • Lacking a good motive for the acquisition • Targeting the wrong company • Overestimating synergies • Overpaying • Exogenous risks • Losing the trust of important stakeholders • Inadequate due diligence • Failing to pull out when all evidence says you should. 11/6/2020 Copyright of UCrest Berhad, Private and Confidential 11
2. United Crest Group United Crest Group United Crest Capital Key ASIC UCrest United Crest Healthcare Financial Services & Investment Semiconductor Chip Design (Public Listed 0143) Digital Health Platform (Public Listed 0005) Office: Singapore, Malaysia, Taiwan, China Cloud Hospital Operator 11/6/2020 Copyright of UCrest Berhad, Private and Confidential 2
3. Founder’s Profile • Eg Kah Yee - Founder & Chairman of United Crest Healthcare (Now) • Chairman & Founder Key ASIC Berhad (2005 – Now) • Chairman of United Crest Capital Ltd (Now) • Director, Russian Singapore Business Council (2017 – Now) • CEO of Silterra (2007 - 2008) • Chairman of NTT Docomo Inter - touch (2004 - 2005) • Honourable Permanent Chairman of Hong Kong Over Chinese Association • General Manger Asia Pac – Synopsys Inc. (NASDAQ) (1989 – 1996) • R&D Manager, Daisy Systems Inc. (NASDAQ) Mt View, CA, USA (1984 - 1989) Contact email@example.com www.unitedcresthealthcare.com www.keyasic.com 11/6/2020 Copyright of UCrest Berhad, Private and Confidential 3
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