M&A

Mergers & Acquisitions Made Simple: 3 Rounds

July 14, 2015 / By Stern Ventures / Comments 0

Suit

Mergers and acquisitions are scary words.

Why?

Because … the process is overwhelming. With so many moving parts, stakeholders, legal challenges, timing issues, and — of course — that nagging feeling that you’re leaving “money on the table,” navigating a merger and acquisition can leave you feeling paralyzed.

To get you moving in the right direction, I’ve broken down the M&A process into its simplest form … three rounds with all the details.

Round 1: Identifying Prospective Buyers

  • Contact prospective buyers
  • Negotiate and execute confidentiality agreement with interested parties
  • Distribute CIM and initial bid procedures letters
  • Initial bid procedures letter:
  • Defines time frame for document submission and information/material required
  • Prepare management presentation
  • Set up data room
  • Prepare stapled financing package
  • Receive initial bids and select buyers to proceed to 2nd round
  • Valuation perspectives – strategic vs. financial

Round 2: Targeting and Executing

  • Conduct management presentations
  • Pitch client to prospective buyers
  • Overview of target company
  • Facilitate site visits
  • Essential component of buyer due diligence
  • Provide data room access
  • Data room contains all info about all aspects of the target (business, accounting, tax, legal, financial, insurance, etc)
  • Distribute final bid procedures letter and draft definitive agreements
  • Distribute final letter to remaining prospective buyers
  • Final bid:
  • Outlines the exact date and guidelines for submitting a final, legally binding bid package
  • Usually more stringent
  • Definitive agreement: legally binding contract between buyer and seller detailing terms and conditions of the sale transaction
  • Receive final bids
  • Prospective buyers submit their final bid package to the sell-side advisor by date

Round 3: Final Closing

  • Evaluate Final Bids
  • Must weigh the binding nature of agreement (stable & lower price > unstable higher price)
  • Negotiate with preferred buyer(s)
  • Seller negotiates with two parties or more to settle issues
  • Select winning bidder
  • Negotiate a final definitive agreement with the winning bidder
  • Presented to target’s board of directors for approval
  • Render fairness opinion (if required)
  • Is a letter opining on the “fairness” (from a financial POV) of the consideration offered in a transaction
  • Supported by detailed analysis and documentation providing an overview of the sale process run, as well as an objective valuation of the target
  • Receive board approval and execute definitive agreement
  • Once the seller’s board of directors votes to approve the deal, the definite agreement is executed by the buyer and seller

[This is only the outline for the article. Please check again for the full content. We intend to publish 1 article every month.]

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