It remains to be seen whether the renewed discussion about the federal budget will have an impact on the film industry. While the situation for service companies is not easing, major productions are also being prepared for the coming months. In order to close liquidation bottlenecks and plug financing holes for investments, financial investors are increasingly coming forward. In addition to the traditional capital market, investment clubs of private investors are increasingly looking for takeover or investment opportunities. Larger M&A boutiques are also getting involved in companies in the "under 20 million" enterprise value segment.
The Federal Association of Mergers & Acquisitions reported an increased number of transaction cancellations based on the member survey in the second quarter. At that time, the differences in purchase price expectations and the findings from the respective due diligence were analysed. In-depth practical knowledge is required for the latter due diligence in particular. The usual procedures do not work in the creative industries. Traditional consultants think too simply in terms of methods and schemes that deliver the wrong results for project-centred companies. "Invisible" but valuable intangible assets or assets that have already been depreciated are often neglected from a tax and commercial law perspective. The company name, reputation, address book and good connections to agencies, creatives and clients cannot be read from the pure operating result. The impact of corona, US strikes, delayed subsidy reform and economic weakness has been too strong in recent years.
Liquidity requirements in particular tempt companies to sell shares to larger structures in favour of access to joint cash pools or intra-group financing options. Realising larger projects has always required partnerships in the form of co-production or co-financing. Intermediary financing banks and sponsors now scrutinise all project participants for creditworthiness and economic stability. This can lead to nasty surprises when the project has long been in the concrete preparation phase. A stable partner is the safer bank.
The classic business succession for founders who are slowly planning their retirement is also a driving force. Especially if the sale can be planned in advance and without rushing, the arrangements should be made calmly and carefully. The aforementioned company audit is essential here. Many documents must be listed and made available digitally. The buyer prices in any risks by discounting the price or, in the worst case, cancels the process completely.
To determine the purchase price, the actual "business" must first be valued, i.e. how valuable the business activity is in the future: acceptance procedures and guarantees, the key people involved and the management's experience with difficult situations are possible factors. The company's debts and assets are then also included in the actual company value. Any risks from possible legal proceedings, tax audits or dormant cost traps reduce the actual purchase price. The specific payment modalities, which can vary from a one-off payment to a multi-year, performance-based payment plan, are also important.
On the buyer's side, there is often an experienced team of professionals who are well versed in both factual issues and negotiating tactics. Many experienced entrepreneurs overestimate their own ability to succeed in these negotiations. This often leads to high discounts or less favourable payment terms for the originally determined purchase price. On request, Ensider offers appropriate Workshops and International Film Partners offers expert advice on transactions in the creative industries. About the Federal Association of Mergers and Acquisitions further competences and providers can be reached.
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(Author: Markus Vogelbacher)