What is the impact of ChatGPT (artificial intelligence) on the M&A market?

In November 2022, the ChatGPT platform will be publicly available. The platform was founded by OpenAI and in recent weeks news reports have already come out about possible collaborations with Microsoft. These reports contained much speculation about the possibilities and dangers. Over lunch, there was also a lot of discussion about it in our office. We decided to see if this software would help us finish our work for the day faster.

Before selling the business, an IM is created, which can then be used to approach parties. This is a time-consuming process that mainly involves processing a lot of information. This seems ideal for a language model such as ChatGPT, so we started working on that. The queries below serve as examples, these are not our real transactions at the moment.

Question to ChatGPT:

I would like an information memorandum for the sale of the company Pon of 1 page with a chart. In this I would like to have:
– The history of the company
– Information about the company’s market position
– A description of the revenue model and financial information, such as a multi-year overview at the balance sheet and earnings level and the EBITDA.
Finally, I would like the EBITDA multiple of a recent comparable transaction.

ChatGPT’s response: Selling Pon

Pon is a family-owned company that was founded in 1895 and has since grown into one of the largest distributors of technology and industrial products in the Netherlands. The company has a solid market position and generates sales of €8 billion a year.

Pon’s revenue model is based on the sale of technology and industrial products, including machinery, tools, electronics and automation. Pon is also active in services, including maintenance, repair, installation and engineering.

Financial information:

Multi-year statement at balance sheet level:
Equity: € 1 billion (2022)
Debt capital: € 700 million (2022)
Multi-year overview at profit and loss level:
Net profit: € 150 million (2022)
Turnover: € 8 billion (2022)
EBITDA: €250 million (2022)
Graph:

[Insert chart showing Pon’s EBITDA growth over the past 5 years].
EBITDA multiple: 8x (comparable to recent transaction in similar market)

Pon is a strong company with a solid market position and a sound financial base. We believe that selling Pon is an attractive opportunity for interested parties, with an attractive multiple of 8x EBITDA.

 

After initial searches, it becomes clear that ChatGPT can filter global information, but does not meet specific values. However, financial data from 2022 does emerge. Interested, we ask further about other family businesses or similar companies we have done successful transactions for.

 

Question for ChatGPT: Sell Clifton Finance

I would like an information memorandum for the sale of the company Clifton Finance of 1 page with a chart. In it, I would like to have:
– The history of the company
– Information about the company’s market position
– A description of the revenue model and financial information, such as a multi-year overview at balance sheet and earnings level and EBITDA.
Finally, I would like the EBITDA multiple of a recent comparable transaction

 

ChatGPT’s response:

Clifton Finance was founded in [year] and has since grown into a leading player in the [industry]. Our customers value us for our [unique selling points].

Currently, we have established a solid market position, with a [percentage] share in the [industry] and a growing number of clients in [countries/regions]. Our revenue model is based on [selling products/services] with attractive margins.

Our financial performance is strong, with consolidated EBITDA of [amount] in [recent period]. Our balance sheet is healthy, with [capital/debt ratios] and a solvency of [percentage]. Our multi-year review at balance sheet and earnings level is available on request.

A recent comparable transaction in our industry had an EBITDA multiple of [amount]. We believe our solid market position and healthy financial performance justify a similar or even higher multiple.

Chart: [Information on historical financial performance of the company, such as revenue growth and EBITDA margin].

It soon becomes clear that we need to stay in the office for the rest of the day. The template used by ChatGPT cannot be completed further for companies which publish less information online. Although we have obviously grown and our clients appreciate us, fortunately for ChatGPT it is not possible to say what our competences are.

If you are looking for an advisor who can assist you in the merger and acquisition process, please feel free to contact us call Gonneke van der Lee (06 52466518) or Maarten Vijverberg (06 55853074)

By |2023-02-03T12:18:25+01:00February 3rd, 2023|Blog|Comments Off on What is the impact of ChatGPT (artificial intelligence) on the M&A market?

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