September, 2024. Blue Tree Group is a Munich-based boutique financial advisory firm, specialising in valuations, financing, and M&A transactions for mid-market companies and fast. growing firms across the German-speaking and Benelux regions. The firm is organised into two dedicated industry sector groups: Consumer, Retail & Services and Technology & Software, ensuring focused expertise tailored to each sector’s unique requirements.

We seek entrepreneurs and shareholders who have successfully built companies in niche markets, leveraging unique technologies or complex business models. With our deep understanding of product markets, we focus on achieving a strategic fit between seller and buyer.

This alignment is the core condition of any transaction and represents the key challenge for an outstanding M&A advisor, who must identify potential deal breakers based on strategic and product compatibility, as well as thoroughly understand and articulate the seller’s technology and business model. However, in an increasingly fast-paced world of growing innovations, as well as time and cost pressures, it is not always possible for our clients to identify the perfect moment or the ideal conditions to initiate an M&A process. Financial advisors many times are contacted when a decision for sales process already has taken.

Over the past five years, as more advanced technologies and disruptive business models have emerged, our industry sector teams have learned that there are three fundamental questions to ask before initiating an exit process:

a)  Which buyer groups have a genuine interest in acquiring your company;

b)  What are your company’s key assets and value drivers from an M&A and buyer’s perspective; and

c)  What conditions are attached to a prospective deal, such as operating within specific geographical markets or meeting minimum levels of operating income, among other factors.

Thanks to our sector specialisations across both industry teams, we have cultivated an extensive network of international buyers and investors, with whom we regularly engage due to the shared themes we frequently encounter. As a result, over the past few years, we have been able to accurately predict the likelihood of deal success and expected purchase prices prior to engagement.

Drawing on this experience, Blue Tree Group has developed the Market Sounding product, which has been successfully implemented with numerous venture capital and private equity firms. The three key components of the market sounding process are as follows:

a)    Comprehensive market, buyer, and valuation research, underpinned by a deep understanding of the relevant markets and products;

b)    Conducting anonymised interviews within our European and US network, as well as with parties outside our network; and

c)    Engaging in detailed workshops upon completion of the market sounding, to discuss the outcomes and implications for a prospective M&A process.

Most of our clients are seeking to sell their companies at optimal valuations. Our objective is to realise a strategic premium from the transaction, while initiating a competitive bidding process, independent of exceptional financial results. Around 6 to 18 months before commencing M&A preparations, a Market Sounding can reveal key value drivers and identify how to enhance value in the proposed transaction. In summary, a six to eight week Market Sounding process will yield the following outcomes for our clients:

a) An indicative valuation range and buyer pricing aligned with a proposed transaction structure;

b) Identified value drivers and recommended timing for the process;

c) An overview of the most suitable buyer groups and their motivations, including selected highly interested buyers, along with insights into why some buyers may not be interested; and

d) A strong foundation on which to build a compelling equity or M&A narrative for the forthcoming process.

In the last four years, Blue Tree Group has successfully advised over 50 European venture capital and private equity-backed companies on Market Soundings. We are confident that completing a Market Sounding in advance significantly increases both the probability of closing a transaction and its overall value. We would be delighted to discuss with you our ideas for you exit. Please reach out to us at any time.