Building a case for buyers with data analytics

With today’s high multiples, sellers must prove their worth. Here’s how sell-side analytics can show what value is truly on the books.

Richard Metzner

Richard Metzner

Advisory Managing Director, Strategy, KPMG US

+1 312-665-3995

These are boom times for deal-making in the chemicals industry, with soaring interest from potential buyers. But even in this market, sellers must prove their worth, which is why more and more are using data and analytics to show potential buyers just how much value is on the block. Especially in the current environment of high multiples, buyers want to see detailed data on operations, markets, performance improvement, and growth initiatives to understand where they can capture value. And with the market operating at a frenetic pace, they need that information right away.

Unfortunately, seller metrics and data are sometimes less than convincing. We find that the information is often too general or cherrypicked. The underlying data may be from disparate sources, or inconsistent with management presentations or sell-side data books—and sellers don’t always apportion enough time to assist potential buyers to develop a thorough understanding. This lack of a plausible, well-articulated story can keep sellers from paying the highest multiple. In today’s hectic M&A market, buyers don’t have patience for a poorly run process: we have seen more than one PE walk away from a deal that would require too much time and effort, moving on to the next opportunity.

To combat this, sellers can invest in sell-side analytics. This can add significant value by ensuring the underlying data ties to prepared seller presentations and is available early in the process to potential buyers. A firm hold on the data can also help sellers increase deal multiples by articulating the value levers in the business—and, importantly, how value is already being delivered.

For example, KPMG supported a seller with the preparation of commercial and operational data books for a business it was looking to carve out and sell. We were brought in early, which allowed for clear alignment between prepared materials and data. We were able to help the seller articulate the work they’d done on value-creation initiatives across their operations, including headcount reduction and efficiency increases, as well as present data to demonstrate that EBITDA was in line with expectations. Our granular analysis added significant value, and the value of the transaction ultimately far exceeded the hopes of the seller.

An important form of data analytics today is showing how a company has fared since the pandemic began. The buyers we work with want a detailed account of the impact of COVID-19: how well the business did previously, how it responded during the pandemic, and how it’s currently performing. Some chemical businesses lost margin after 2020 when production ramped up again and costs soared. Others—those with high inventory levels—saw record profits when supply-chain disruptions hit the industry. Whatever the situation, buyers are looking to gain a view of normalized EBITDA to understand a company’s long-term potential.

Given the ebullient M&A market, the time is ripe for chemicals-sector sellers to increase their investment in data and analytics. This can not only enable faster diligence, but also add value across the deal lifecycle by increasing the availability of accurate, timely, and granular data for buyers.

Key takeaways for sellers

  • Buyers want a detailed explanation of the effects of COVID-19 on potential targets.
  • Increased diligence on the part of buyers requires high-quality sell-side reports and data.
  • Sellers can add deal value with data-rich analysis that responds in detail to buyer inquiries.
  • Sellers should invest early in data analytics to increase potential deal value.