Virtual lunch visit to Florijnz Corporate Finance
On Wednesday, March 3, 2021, more than 30 Friends of Cobbenhagen came together for a Boardroom meeting including a delicious luncheon. The meeting was graciously hosted by Hans Minnaar, founder and director of Florijnz Corporate Finance.
A look around Florijnz’ boardroom
Alumnus and Friend of Cobbenhagen Hans Minnaar founded Florijnz in 2012 with the aim of providing guidance for entrepreneurs vis-à-vis banks. He has helped more than 160 directors and major stockholders to buy, sell, valuate, and fund their enterprises. Florijnz also initiated the Data Science Top 50 event for Small and Medium-Sized Enterprises. This initiative offers a national platform to identify the most successful Data Science players of the moment. During this Boardroom meeting, Hans gave the Friends of Cobbenhagen a look behind the scenes of Florijnz in corona times.
From the seller’s perspective, Covid-19 may have a bad impact
Mergers, acquisitions & funding in corona times
During the first lockdown, the merger and acquisition market initially ground to a halt. However, the market has recovered very robustly. What are one-off and what are the structural effects of the corona crisis?
The crisis has generated a strong merger and acquisition climate, in which there are clear winners and losers. Many advisors are expecting an increase in deals this year, especially in the wake of the necessary economic restructuring that is bound to take place. It is important for any business to get a clear understanding of where you want to go and how you want to achieve this. Without a perspective, there is no trust so every business needs that dot on the horizon.
From the seller’s perspective, the corona crisis may have a bad impact. For those enterprises that were directly hit, the recovery time will be long, for instance, for airlines. Voluntary sale is not an option here so there are likely to be many bankruptcies. Suppliers of these directly affected sectors will see a decline in sales as a result. For these parties, it is important to limit their dependency as quickly as possible. Then there are parties that were directly impacted, but where the measures were only temporary, for instance, hairdressers. Fortunately for some Friends, these were allowed to open again this week. For the temporarily affected companies, it is important to quickly pick up the thread and make good the one-time loss.
Fortunately, there are also winners
Fortunately, there are also many winners. The greatest winners are enterprises where the impact is expected to be structural, for instance in e-commerce, ICT, and online learning. In these sectors, voluntary business sale or the acquisition of growth funding are profitable options. Other winners in this crisis profit only temporarily, for instance, producers of face masks and smokers’ benches. In Florijnz’ view, they are temporary in nature. For these companies, sale is certainly an option, but the positive effect is temporary and therefore will not much affect the selling price. These temporary opportunities can form a leg-up to better structural development. Seizing opportunities offered by the corona crisis is important, but it is even more important to turn these opportunities into structural product/market combinations.
Buying or selling in corona times
The corona crisis can give rise to various reasons for selling a business. For example, a company may be operating in a booming growth sector or selling the company may be necessary at a certain point owing to liquidity issues. It is important that the selling process is not initiated until everything is in order and agreements with stakeholders are clear. This is to avoid an opportunistic sales process. Things are different from the buyer’s perspective, of course. Opportunities present themselves to take over companies that have poor liquidity due to the crisis. This will become especially clear in the hospitality industry in the near future.
However, it is true that major banks currently have limited scope for acquisition financing. We see that the price levels of acquisitions are stable due to the large amount of money available, but that Covid-19 effects have changed the pricing structure. Before the crisis, the pricing structure often consisted of a 20% investment by the buyer, 20% by the seller, and 60% financed by a bank. During the crisis, however, it is often 20-30% from the seller/buyer, 0-50% from the bank and 20-30% via an earn-out. The earn-out terms are dependent on the results of the company’s performance after sale.
So where are the opportunities at the moment?
They are mainly to be found in specific growth propositions, e.g., in e-commerce, data science, sustainability, climate, and biotech. It is certainly not an easy time, but with the necessary creativity in funding and pricing structure, a lot is possible.
The Friends of Cobbenhagen clearly have the right knowledge. During the poll, almost everyone was able to name the correct growth sectors: technology, media and telecommunications, and consumer and leisure (E-commerce). Florijnz’ experience also shows that these sectors are clearly winners.
Thanks to Willem van der Steen (Florijnz) for creating this report.
The Friends of Cobbenhagen regularly organize so-called Boardroom meetings and company visits during which you get a glimpse of the business of one of the Friends. Curious about these activities? Find out if a membership of the Friends of Cobbenhagen is something for you.
Also in Tilburg University Magazine
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Date of publication: 24 March 2021