How to stay ahead of competing bidders? Analytics.

12 October 2017

By Novella de Renzo and Alenka Turnsek

Value creation through operational improvement: nothing new in itself, but the success of private equity was often attributed to the leveraged financing of the transaction without interfering with the underlying commercial reality of the business.

The evolution of value creation has been going for decades. However, recent changes in tax rules that were introduced by the OECD BEPS initiative in respect of the cap on interest deductibility, preventing granting treaty benefits in certain situations, to list a few, has slowed the use and value of debt financing; also refer to http://www.pwc.co.uk/who-we-are/regional-sites/london/insights/How-BEPS-is-about-to-disrupt-Private-Equity.html.  Coupled with an increasing trend of add-on acquisitions and complex carve-outs, (financial) investors are increasingly looking to unlock value through changing their operational models e.g. refine business processes, remove functional duplication and inefficiencies.

Whilst often referred to as post-deal, it is critically important to come to grips with possible areas of operational improvement while evaluating a transaction. This will allow smarter bidding, increasing the chances of outbidding the competition.

In today’s data-enabled world, you can use data analytics and modelling applications such as PwC's proprietary STRATA Forecasting Framework to evaluate targets. Modelling and analytics helps with understanding the financial impact of different post deal operational models and test various scenarios using commercial forecasts and tax rules and assumptions. This will allow to make informed decisions on the value of post deal operational improvement opportunities when bidding for a company. In addition, it will give reassurance on the alignment of the operating model with the new fiscal/ legal landscape to recognise the value drivers’ contribution, as well as the benefits that come with effectively managing risk; also refer to http://www.pwc.co.uk/issues/deals-strategy-operations.html.

To find out more, you can get in touch with us using the details below,

Novella de Renzo

Phone +44 (0)20 78043522

Email - novella.de.renzo@pwc.com

Alenka Turnsek

Phone - +44(0)20 721 35045

Email -  alenka.turnsek@pwc.com

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