Case study №3 – M&A deal in the renewable energy segment
Client
A Bulgarian private company, operating in the renewables energy sector (solar panel electricity generation with 13.6 MW capacity) gave us mandate to complete their sell-side M&A transaction. The entity’s average revenue at the time (for the last 3 years) was BGN 7.4 million. The capital ownership structure was the following:
- A: Majority owner – 78%
- B: Mid-size interest – 17%
- C: Minority interest – 5%
Challenge
The client was looking for an exit strategy for 87% of their stake in the business, which they had been developing for nearly 8 years. The entity’s key asset (apart from all the property, plant and equipment items on their balance sheet) was the contract they had signed (upon incorporation) with the energy authorities, fixing their output electricity prices for 20 years at 6X the average MW market price for electricity from conventional sources. This deal was part of the government’s green energy subsidy policy at the time.
We offered (and the client accepted) a variable and comprehensive fee structure (based on final sale price and transaction completion deadline) for our services.
Approach
As part of managing the sell-side process and completing the mandate, we executed the following main steps:
- Organisation and preparation (1)
- 1st and 2nd round bidding (2)
- Negotiations and deal closing (3)
(1) Initially we conducted multiple interviews with the client to determine their objectives and map out the sale process, we performed due diligence and valuation analysis for modelling the deal, we selected a potential buyer pool (both local and foreign companies) and prepared the marketing materials (Teaser and Info Memorandum), finally we prepared the confidentiality agreement (CA) for the bidding rounds
(2) Subsequently we contacted all targets per buyer pool, execute CAs with the interested parties and distributed the marketing materials to them, along with bidding procedure letters detailing indicative price, deadlines and deal structure. As part of this step we also prepared the management presentations of the business and set up data rooms for subsequent due diligence purposes. Financing package for the deal was not requested by the client as part of mandate. Once initial bids were received we moved on to conducting management presentations and site visits, as well as providing data room access, to all initial bid parties. We then provided draft purchases and sale agreement (PSA) and received final bids from candidates.
(3) Final bids were reviewed, analysed and discussed with the client – based on our recommendation the client authorised us to entered into final negotiations stage with 2 prospective buyers. The winning bid was selected and approved by the owners. We obtained all necessary approvals from the energy administration and closed the deal.
Results
The entire process took nearly 18 weeks to complete (about 90 business days) – the deal was completed approx. 10 days ahead of schedule. Throughout this engagement we delivered multiple marketing materials, contractual agreements, process maps, analysis and recommendations reports, business presentations, as well as interviews and negotiations advisory and support. The deal was successfully completed. The shareholders received a total of EUR 11.7 million in cash for 87% stake in the enterprise. The wining bidder in this transaction was an Italian energy company with international solar plant holdings in 13 countries (across Europe, Africa and Asia), worth over EUR 460 million. The remaining 13% of the entity the founders kept as passive interest (dividend-only source); however, their were required to stay on in management and advisory capacity for the next 30 months, which was stipulated per the PSA.