Jurgis Oniunas, IMAP Chairman, for “El Economista”

Maite Martínez. Bilbao.

IMAP, a middle market mergers and acquisitions (M&A) advisory firm with 450 professionals in 41 countries, recently held its international conference in Bilbao, where the Spanish firm, IMAP Albia Capital, is headquartered.

The president of IMAP, Jurgis Oniunas, spoke to elEconomista.es about the future of the M&A sector in the current context of uncertainty and high inflation, telling us that “large transactions will suffer more” and the focus will be on high quality investments.

He also believed that the structure of the transactions will change in order to reduce the investor’s risk, since “money is more expensive, there is less enthusiasm and more uncertainty”. Even so, Jurgis Oniunas does not believe that liquidity is going to disappear, for “there are trillions and trillions of dollars to invest, but we’re going to see less of it”. IMAP expects to close the year with more than 200 deals worth $23 billion, similar to 2019.

Why did you choose Bilbao for IMAP’s international conference? We hold two conferences a year, in spring and autumn, and we usually go to countries where our firms are located. The most recent one was held in Paris and another one years ago in Barcelona. This year it was time to discover Bilbao.

What are the objectives of the conference? In addition to discussing the economic situation, the more than 100 professionals from 34 countries who attend have contacts with companies and investors in different markets. With their knowledge of the local business culture, they study opportunities to attract investments that promote the development of the local business and industrial fabric.

What is IMAP’s business outlook for 2022? We’ve closed 181 deals worth $21 billion so far in 2022. This follows a record-breaking 2021 in which we did 294 deals worth $27 billion as the economy bounced back from Covid. This year we’re expecting to get back to normal and it’s clear that we’re seeing a slowdown. The last quarter is when most deals are closed and we expect the figures to be similar to 2019, with more than 200 deals worth $23 billion.

A good year despite the uncertainty? We’re facing some headwinds that are making it more difficult to move forward: high interest rates and inflation above 8% due to energy, food and housing prices. Bringing the inflation down is going to take time and central banks are going to try to get it down to 2% by the end of 2023. It’s a very painful process in which demand is destroyed and the smaller and weaker companies are the ones that suffer. And we have to help our customers through that.

What lies ahead for the industry in 2023? A tough year. Apart from destroying demand to reduce inflation, central banks are withdrawing money from the system. If you reduce liquidity, there will be less investment, credit markets will have less money, and companies will have less access to credit and also to financed M&A deals, etc. Large transactions in particular will be affected. IMAP operates in the middle market conducting transactions worth up to $500 million, and that environment is going to be affected. But we also have many deals ranging between $20 million and $50 million, which won’t be as severely affected by the impact of the withdrawal of liquidity due to inflation.

Are deals going to be slowed down by a lack of capital to invest? No, there’s a tremendous amount of liquidity, trillions and trillions of dollars that are not going to disappear, but we’ll see less of it. Private equity and other investors have investment deadlines and they’re going to put the money to work, but the conditions are going to change. There will still be deals, though they will focus more on high quality and the structure is going to be modified. Due to economic uncertainty and in order to reduce risks, there will be an initial cash payment and future co-payments contingent upon how the business evolves. In addition, we’re coming from a time when there was a lot of liquidity and a lot of appetite to invest, and that has generated a valuation bubble. That’s about to change, because not only is money more expensive but there is less liquidity and enthusiasm and more uncertainty in the markets, which will cause valuations to fall. There is a disconnect between the seller’s aspirations and what the buyer is looking for in an environment where there is pressure to reduce risk and move towards different structures.

What kinds of investments are you looking for? Companies with strong balance sheets, cost control and positioning in the supply chain, among other things. This doesn’t mean that companies of this kind are available for sale, but they’re the kind we’re after.

What advice do you have for those who want to sell but are holding back in the current environment? It never seems to be the right time, due to the fact that when you’re earning more it’s not the right time either. Once the decision is made, you have to adapt it to the circumstances, because a year from now things might  be better or worse. You have to go to the market, see who’s interested and structure the transaction in a way that’s acceptable to both parties: that gap between what the buyer is willing to pay and the price the seller is asking. And that’s where we come in to design the best option.

What were the longest, the shortest and the most curious transactions in IMAP’s history? The longest took eight years, with three negotiation processes for the sale, three due diligences and three investors, until we found the right fit. The shortest was six months, because that’s the bare minimum to complete the process. As for the most curious case, our U.S. partners had a client who had received an offer for $25 million and he wanted to sell for $27 million. The partner analysed it and concluded that the company was worth $100 million. The deal went through after a year for $360 million. All this in the context of a record year. No M&A deal is simple, they’re all different. That’s what makes the sector so interesting.

Valuations: “They’re going down because there’s less appetite and more uncertainty in the market and money is more expensive.”

Transactions: “The structure and timing of transactions are changing to adapt to the new situation.”

Closing 2022: “We expect to close the year with more than 200 deals worth $23 billion.”


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