INTERVIEW : Mr Revel for ERNST & YOUNG (EY) IN M&A

On September the 28th, GEM Finance Society and GEM Career Center had the pleasure to organise the FINANCE BOOTCAMP at Grenoble Ecole de Management.

In case you missed it, GEM Finance Society had the opportunity to ask our participants questions about the sector and their company. We will post each one of the interviews on our blog, so keep posted.

 

INTERVIEW WITH MR REVEL FOR EY IN M&A

Today, meeting with Mr Revel, at EY. Good reading!

 

Short presentation of M&A at EY: The work of an M&A advisor could be described as a real-estate broker for companies. When companies appoint EY as financial advisor for a sell-side mandate, the M&A department at EY is entitled to find the best acquirers for the transaction to sell the company in the most efficient process.  When companies retain the M&A department of EY for a sell-side mandate, EY produces an “info memo” in which a detailed marketing presentation of the company is done. This document contains elements about the business of the company, its business units, the management and some business plan information. This document is accessible for investors who already shown a mark of interest by sending back a signed NDA after receiving a teaser. Then, if the company is still interested, it is granted access to the data room after its Letter of Intent has been accepted. It is where all the confidential documents of the company are stored such as all the contracts. Then the buyer company can make an offer under specific conditions. After that, they negotiate the SPA (share purchase agreement). When the transaction is closed, companies will pay the success fees to EY.

 

Do you deal with all the process of mergers and acquisitions at EY or just with the company valorizations that are going to be merged / acquired ?

There is one M&A department at EY, but it’s not the only department involved. For Due Diligence purposes, there is a Transaction Services team and for the deal adjustment the Valuation team can be involved in order to calculate the PPA (Purchase Price Allocation), for example. After the deal is closed there are other teams that work on post-merger integration and synergies implementation.

Do the companies that come to EY for their services have always a specific idea of the company they want to merge / acquire? Do you have some companies that just know that they want to merge or acquire a company in specific sector and that do not know precisely what is the company they want?

There are the two cases. Sometimes, companies really know which one they want to acquire but sometimes companies just know they want to acquire a company in a specific area and with specific metrics. In this case, there is real screening work. For this part of the work, they use databases such as Amadeus, S&P Capital IQ or websites like CFNEWS.

Are you in charge of contacting companies that are going to be acquired or is it always companies that want to acquire other ones that do this job? 

Indeed, EY is in charge of contacting companies.When a company mandates EY to sell its business, EY is in charge of selling it at the best conditions. Thus, in M&A at EY you must contact all the possible counterparts and bring together the potential buyer and the seller to agree on a price and deal conditions.

Do you help companies that want to merge / acquire another one on their financial plan to realize this operation? So how to finance themselves, how much should they borrow from the bank to merge/acquire another company, etc.?

 When there are acquisitions, EY helps companies with their financial business plans. For instance, they advise them on how to structure their debt or where to borrow money.

I know that in M&A you work with lawyers to be sure to respect the law, for instance monopoly laws. So how do you work with the lawyers in M&A at EY? Do you work with lawyers during all the mission or do they work on it before/after you?

People in M&A at EY often work with lawyers. At the end of each step of the process, lawyers work on the mission. Lawyers at EY often deal with all the documents required for a transaction.

I know that when you are valuing a company, you estimate its future capacity to be sold. How do you do at EY to estimate their future capacity to be sold? Are there employees who are specialized in different kinds of sectors to do this job or is there a multidisciplinary where every employee does this job for all sectors? 

In the M&A department there is a real multidisciplinary. Thus, there is no market separation with employees who are specialized in specific market. The process of valuation is lo based on classic valuation methodologies such as transactions comps, listed comps, DCF,…

At EY, you work with companies that are worldwide established. So how do you separate the workload at EY when you have these kinds of companies and how do you chose in which country missions are going to be tackled at EY? Is your workload separation different whether the worldwide company established is the one that acquire or the one that is being acquired?

They answered to this question with the following example: If the buyer company contacts EY in New York to acquire another one in France, then EY in New York contacts EY France to separate the workload. Then, they will deal with all the mission together. Thus, there is a real separation of the workload at EY.

When there are mergers, what do you do with positions that are in double? For example, when there are two accountants, how do you chose the one who stays in the company?

It is not the M&A job, but those companies can appoint other advisory departments at EY. Then this department makes a diagnostic about the company. It is a little bit like an audit. Then, EY gathers all the information and makes a benchmark with similar companies. And then they make a report to advise companies.

When there are mergers, do you recreate all the processes of companies or do you put head quarter processes to the company that have just been merged? How do you make this decision?

There are specific departments at EY that are able to advise companies on their processes, but it is not a task handled by EY M&A department.

Interview carried out by Maël Rohrig

GEM Finance Society

 

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