Practical M&A guides: selling, buying and financing a business

Three main families of methods coexist: the asset-based approach (adjusted net asset value), the cash-flow approach (DCF) and the market approach using multiples (comparison with comparable transactions or listed companies). In practice, several methods are cross-checked to establish a valuation range.

The LOI (letter of intent) sets out a buyer's interest and the main terms of the deal: indicative price, scope, timetable, exclusivity and conditions precedent. Usually non-binding on the final price, it frames due diligence before the definitive agreement is signed.

An SPV (special purpose vehicle) is a company set up to carry an acquisition. It ring-fences the acquisition debt, brings several investors together and optimises the structure through leverage (LBO).

Acquisition finance usually combines an equity contribution, bank debt (senior debt), sometimes mezzanine debt and vendor financing. The structure often relies on leverage through an SPV. The right mix depends on the size of the deal, the target's debt service capacity and the buyers' profile.

Factoring lets a company sell its invoices to be paid immediately. Reverse factoring is initiated by the buyer: it lets its suppliers be paid quickly while preserving the buyer's own cash. Both finance working capital requirements.