Time and accuracy are of the essence in the Investment Banking world. Investment bankers need relevant and detailed information about an industry, market and/or company to fully understand the potential of an investment or deal. Market research can provide the context around a company’s future growth outlook, possible risks, opportunities and market performance to aid their strategic assessment before embarking on merger and acquisition (M&A) advisory, security underwriting or initial public offerings (IPO.)
Here are some key areas where market research can make a real difference to how investment banks understand potential opportunity and what questions to ask to get a clearer picture of a company’s performance.
Raising Capital and Security Underwriting
When raising capital, what do you use to determine the value and risks of a company to price their securities? Imagine this, a company hands you their close-to-perfect financial statements, indicating they should be priced higher when it’s time to issue their new securities to fund their upcoming project. They’ve shown ideal growth of, let’s say hypothetically, 10% year-over-year.
- Would it impact your securities pricing to know that your client’s sector is growing 20% year-over-year?
- Their biggest competitors have been growing at least 15% and have a footprint in markets your client does not?
- Does that change your thesis of this client’s value and risk?
Or when conducting an IPO, are you using reliable and detailed numbers to capture the true Total Addressable Market (TAM)? The true “size of the prize” includes both market sizing made up of both public and private companies as well as sector sales from all channels. An accurate TAM should capture the available market inclusive of competitors who generate sales through channels ranging from stores, online and direct selling to fully understand the potential.
M&A Advisory: Pitching through Due Diligence, Negotiation and Post Deal
When an investment bank acts as an advisor to the buyer in M&A advisory, the following questions will help build the true financial picture of a target company:
- What is the source of growth for this acquisition target?
- What is the ratio of an identified target company’s portfolio of growth brands/product lines versus declining brands/product lines?
- Are they in geographies exhibiting ideal macro scenarios for this target company and sector?
- What is the combined share after the deal?
- How would all of this affect the negotiation process?
Granularity is key. The advantages lie in being able to understand the most detailed depiction of the sectors and sub-sectors, comprehensive analysis of a target company’s product lines/brands and core consumer trend drivers based on the geography’s macro environment and customer preference.
Conversely, when representing the seller in the M&A process, the following questions should be considered:
- What is an adequate offer from the buyer?
- Is it in line with your client’s performance within the sector and sub-sectors?
- Do you see interesting and rich sub-sector market sizes your client should grow in after they get acquired or merged?
The ball can be in the seller’s court as well so to speak. An M&A team’s ability analyse a few factors will make a much more powerful case in the strategy and negotiation process. They can present their client’s position within a sector via total shares, opportunities and risks against the projected sector size, economic growth and showcase their customer supply strategy through sector channel trends. See more ways market research supports the M&A playbook
Euromonitor International works with a variety of top, middle market and boutique investment banks globally and have answered all the questions above through our easily accessible market research platform, Passport, and other research offerings. We provide the fundamental insights to investment banking firms through our coverage of numerous consumer sector’s total market sizes, public and private company/brand shares and the channel breakout for up to 100 countries. Additionally, we offer granular depiction of the macro and socio-economic factors impacting the landscape for up to 210 geographies. Euromonitor International continues to aid our investment banking client’s specific business questions through our custom IPO and consulting work. Our e-commerce SKU database, Via, supports the advisory community with a wealth of valued metrics on potential acquisition targets, including small or emerging players, providing unique metrics around price positioning, portfolio fluctuation over time, share of shelf, as well as consumer satisfaction and engagement.
Request a demonstration to learn more about how Euromonitor International can help investment banks.