CapEQ

Two of the UK’s leading M&A advisors have launched the world’s first ethics-driven deal-making consultancy.
Whilst many advisors signal their progressive credentials, new consultancy Capeq was launched in July 2020 with a plan to build their entire operation around the concept. The aim is to achieve B-Corps* status within their first year, joining an elite global movement of businesses which place social and environmental factors alongside financial imperatives.

Capeq founders James Pugh and Mark Sapsford understand that no other global M&A advisor has ever attempted B-Corps accreditation. The consultancy’s unique positioning adds a distinctive element to the founding partners’ ferocious work ethic and hard-won experience, spanning 30 years and more than 200 client projects.
Capeq scope

The new venture will advise entrepreneurs, business owners and shareholders on long term growth, ongoing value creation and a maximised sale price. Projects may entail optimising strategy and operations, obtaining investment, overseeing M&As and valuing, preparing and selling businesses. Yet as Pugh explains, “every Capeq project, interaction and relationship will go beyond the standard commitment to optimise bottom line results, by factoring in progressive ethics, long-term strategic thinking and the client’s personal goals.”

Sapsford adds that “too often, M&A’s have been about the bottom line and nothing more. At Capeq, we start with the people side of the business, not the numbers. We advise on what’s right for the client, not us. That may sound obvious, but 30 years’ experience in the field suggests it’s far from usual!”

To maintain focus, the business has drawn up a 10-point Manifesto, which acts as both a promise to clients and a constant point of reference for the business. Pugh believes this clarity is both timely and necessary. “There is a huge gap in the market,” he says, “for trusted, independent strategic planners, driven by a progressive social and environmental agenda. As we emerge from a period of upheaval and reflection, this is the right idea, at the right time.”

As a young M&A advisor, ethical corporate finance boutique Capeq is adopting technology not just to be more efficient and effective but to reduce the carbon footprint of transactions. Co-founders James Pugh and Mark Sapsford explain their journey so far:

It’s fair to say M&A has been late to the party in adopting technology. Although the number of solutions available has gained momentum in recent years, buying and selling businesses remains a mix of rational decision-making and ‘emotional’ factors – gut instinct and customer/supplier relationships play a big part in dealmaking – which is hard to marry with data analytics and artificial intelligence (AI).

The basic tech stack for any M&A advisor includes a sales database (CRM), M&A transaction research platforms, and a secure virtual data room platform for due diligence. These can either be standalone, or a single end-to-end dealmaking platform.

But we have found that some of the inbuilt algorithms are not terribly useful. Many focus heavily on SIC codes, which is too narrow in an era where most acquirers come from outside a market sector and doesn’t include the strict acquisition criteria – eg size, geography, specialism – used by nearly all large corporations and investors. These datasets need filtering by a human being to avoid wasting time and including genuinely good acquirers from out of sector.

M&A tech and the planet:

As an ethical advisor, Capeq’s approach to digital products has been to look beyond the efficiency and efficacy, and factor in the social and environmental cost of transactions.

Video conferencing
For example, travel can become a significant cost of doing deals, usually borne by the client or acquirer. While buyers and sellers do need to meet physically at some point in a sale process to build rapport and decide if they like each other, we have found that most exploratory discussions can be covered on a Zoom call.
A well-known benefit of lockdowns has been the widespread adoption of video conference calls, which not only saves clients thousands in hotel and flight costs, but reduces the carbon footprint of a transaction by up to 70%.

Confidentiality agreements
With all information exchanges governed by non-disclosure agreements, it’s critical to get these forms signed quickly and easily. Document signing software must also be flexible enough to allow in-house lawyers often want to amend clauses or insert their own. To collate and manage lots of NDAs in a business sale process, we use Docusign – which complies with EU and US electronic identification regulations and is well-known in the M&A community.

Digital sale prospectus
We have been experimenting with sale prospectus design to encourage acquirers to remove the need to print them. Serial acquirers typically spend a couple of minutes assessing a handful of metrics before deciding to progress discussions, so presenting key data clearly, embedding video and hyperlinks, and keeping documents brief all help reduce the numbers printed. Considering that it takes 17 trees to make a tonne of paper, a largely paperless transaction can reduce environmental impact in a meaningful way over the course of a year.
While there are many presentation software tools available, compatibility can be an issue when shared with other parties, and we are currently experimenting with Powerpoint, Prezi and Adobe Spark.

Virtual dataroom
The due diligence phase uses the most paper – lawyers need to go through the smallprint and tend to prefer a printout – but the keyword scanning functions in VDRs are now much better at unearthing relevant documents quickly to reduce the need to print. We use Firmex – a well-established and highly secure platform.

Acquirer database
Knowing who is buying who and why is critical to selling any business, and the main dealmaking platforms include acquirer database sections. The challenge here is most M&A transactions have scant information on buyer rationale and value structure, and needs manual secondary research to get the data into shape. In light of this, we still prefer our proprietary data built on conversations with acquirers to match what they want and to look out of sector.
We use Zephyr, Orbis, and Refinitiv to build longlists of potential acquirers, then filter manually according to their criteria.

The future
M&A transactions are ultimately about value creation, and getting deals done is increasingly linked to data visualisation, articulating synergies, and capturing insights. Compatibility remains an issue due to the large number of parties involved in a single transaction – all with their own preferred way of doing deals. There is no consensus on preferred platform or systems, but advisors get to try some of these tools in a live situation which we expect to accelerate adoption.

Our focus on creating value while reducing our environmental footprint will continue to drive our technology decisions, and we will use our place at the table to influence others to consider wider ethical issues as part of the dealmaking process