Please find below the text of the interview with Dr. Rafał Kusy which was published in the recent issue of the magazine „Kapitał Polski”
The legal firm DLP Dr. Robert Lewandowski & Partners has been present on the market for over 15 years. What were the most important stages of the development of the legal firm during this time and what is your current scope of expertise?
The legal firm DLP Dr Robert Lewandowski & Partners sp. k. was established to offer services to domestic and international clients in the area of business law. We advised the Warsaw city council concerning the staging of the UEFA EURO 2012 tournament, represented clients within court disputes subject to such projects as the building of the national football stadium “PGE Narodowy” in Warsaw and the container terminal DCT in Gdańsk. We are members of international networks like DIRO (www.diro.eu) with its seat in Hamburg, IR Global with its seat in London (www.irglobal.com) and IsFin with its seat in Brussels (www.isfin.net) gathering experts of law and business from the entire world.
Our highly qualified, multilingual team offers cross border legal advice tailored to the expectations of our clients aimed at resolving complex issues and problems within interdisciplinary co-operations worldwide. We are renowned for acting comprehensively and efficiently adapting to the requirements of our clients.
One of the main fields of expertise of your firm is the M & A market? Which methods are used by you to provide evaluation and what is the demand for these type of services?
The success of an M&A transaction depends on the appropriate prediction of its results already at the early stage of negotiations and the key factor here remains the market evaluation of the company.
Mostly the process of evaluation is preceded by a due diligence investigation subject to a thorough examination of the economic and financial standing of the company when identifying weak and strong sides as well as chances and risks. The selection of an appropriate method of evaluation relies on three factors: evaluation target, data availability and legal context.
The aim of an enterprise evaluation is identical to the motives of the conclusion of an M&A transaction (arbitration opportunity theme, taking over control theme and achieving synergy theme). The arbitration opportunity theme means the use of an occasion when a company is offered for sale at a price lower than its liquidation value in order to sell its assets and achieve in this way a positive financial result. In this case methods of valuation of assets are commonly used (e.g. the adjusted asset net method). The taking over control theme without undertaking any integration is based on the buyer’s expectations as to the possibility of improving the effectivity of the object of sale which through the introduction of certain changes intends to increase the value and the sale above the purchase price. In this case profit based methods will be used in reflecting on the future value of the evaluated company. Finally, the synergy theme of merged companies is based on the buyer’s assumption that the acquired company will contribute to the strengthening of the market position of the acquiring company. In this situation profit based methods will be applicable. The issue of availability of market data concerns the emerging markets within which a large number of M&A transactions occur, however, this market often lacks transparency. In addition, stock exchange data also shows large deviations. Under these circumstances certain methods of evaluation will not be taken into consideration as this may lead to rather significant uncertainty of the result.
In the practice it is sometimes difficult to precisely indicate which of the aforementioned factors is the most important and the choice of a method should be made individually in each case. The value of companies is directly related to the scope of their operation and some entities have lost value recently due to the Covid – 19 Pandemic. Naturally, there have been entities which have capitalised on the Covid- crisis mostly by filling an output gap for special products or services.
At present we can see a clear decline of some valuation methods such as market methods and partially profit related methods and increasingly asset valuation methods are becoming popular (so far they have been at the end of these analysis).
With regard to valuations subject to start–up entities in the Covid-19 environment it should be stressed that investments have been reduced by 50%. In many cases investors have concluded that “we will examine” and therefore many business models have become out of date in the new market. Though it has to be admitted that start-up entities in the technology sector are still popular among investors.
The Pandemic has had a negative impact on the functioning of financial markets and on the world economy as a whole. Could you tell us about the forecasts on the Post-Covid-19 time?
In the view of our law firm financial markets forecasts are very promising for the future after the end of the Covid-19 Pandemic which has had put on hold many activities on the development of the financial services. The important aspect of the development of markets are services offered subject to the valuation of business entities which are a basis for the development of M&A market worldwide.