How do you sell your company?
Merger & Acquisition step-by-step process
Investment Banks offer these services — M&A, IPO, and Rais capital via equity or debt. The sale of a company, division, business, or collection of assets is a major corporate event for its owners (shareholders),
mgmt, employees, and other stakeholders. Often a seller turns to its bankers for a comprehensive analysis of strategic alternatives, including the sale of all or part of the business, recapitalization, IPO, or continuation as status quo
Sell-side M&A deal Process:
Step 1: Pitch & Engagement:
Advisor must gain clear understanding of the seller’s priorities to tailor
the process. Deal team drafts a detailed process timeline and roadmap,
including target dates for milestones such as launch, receipt of initial
and final bids, contract signing, and deal closing. They will conduct due diligence on the part of the sell-side adviser, kicking off with an in-depth session with target mgmt. The sell-side advisor must have a comprehensive understanding of the target’s business and mgmt’s vision; ensure that the advisor understands the financial model, which is the basis for valuation performed by the buyer. It also identifies potential buyer concerns: growth sustainability, margin trends, customer concentration, environmental matters, contingent liabilities, and labor relations.
Step 2: Pre-launch:
This is the phase of preparing Marketing Materials.
• First formal introduction of the target to prospective buyers; essential
for sparking buyer interest. It may not reveal the name of the target company.
• Two main marketing documents: teaser and confidential information
memorandum (CIM), produced by sell-side advisors, with
substantial input from target mgmt.
Step 3: Marketing
The marketing team from IB will make a scripted phone call to each prospective buyer by a senior member of the sell-side advisory deal team
• Delivery of teaser and (CA) Confidentiality Agreement
• Following execution of the Confidentiality Agreement, the sell-side advisor distributes CIM and, later the initial bid procedures letter.
Step 4: Bidding Rounds
Buyers are given several weeks to review the CIM and study the
target prior to submitting initial non-binding bids. Buyers may also engage investment banks as M&A buy-side advisors and/or financing providers, as well as consultants. The initial bid procedures letter is sent to buyers following the distribution of CIM. States date and time by which interested parties must submit their non-binding indications of interest (“first round bids”). After which few interested buyers will send across Initial Bid, which will cover the price, funding plan and industry experience.
Buyers and their bid proposals are evaluated and a few of them are selected for the second round based on their bid price, valuations, market valuations, financial standing, synergies & buyer’s reputation. In the second bidding round a Virtual Data room is set up forall the bidders to have a look and do further analysis.
DVR contains essential company information, documentation,
and analyses:
• Financial reports, industry reports, consulting studies, customer and
supplier lists, labor contracts, purchase contracts, description and
terms of outstanding debt, lease and pension contracts,
environmental compliance certification
• Confirmatory due diligence (i.e. validating facts and
business/technical assumptions) prior to consummating a
transaction (after buyer has decided to seriously pursue the
acquisition): charters/bylaws, outstanding litigation, regulatory
information, environmental reports, and property deeds.
Management presentations are hosted between a potential buyer and seller to understand the details of the M&A proposal and discuss future roadmaps. After which interested buyers will submit the final bid proposal
Step 5: Closing
Once the seller’s board approves the deal, the definitive agreement is
executed by the buyer and seller. A formal transaction announcementagreed to by both parties is made with key deal terms disclosed. Next, the buyer and seller work on regulatory and shareholder approvals communication items like press releases and the bank creates a fund’s flow analysis which shows how the money will be transferred on the day the deal closes.
Party time:
After the deal is successfully approved by shareholders and the payment is done it needs to get all the necessary regularity approvals for everyone involved to have a deal closing party. This all typically takes 4 to 8 months to process and a few deals might fall apart due to not seeking regulatory approval or if they fall under anti-trust lawsuits.
