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M&A Process Essay

1359 words - 6 pages

The M&A Sales Process
FINA 6222: Mergers and Acquisitions

Auction Process Overview Organization and Preparation First Round Second Round Negotiations and Closing
• Stakeholders • Broad vs. Targeted Processes

• Valuation and Due Diligence • Marketing Material and Confidentiality Agreement Preparation
• First Buyer Contact • Initial Bids and Buyer Selection • Management Presentations and Data Room • Final Bids • Evaluate Bids and Select Winning Bidder • Financing and Approvals

Process Map
Seller Retains Advisor and Signs Engagement Agreement Advisor Performs Internal Due Diligence Advisor Prepares Marketing Materials Advisor Approaches Prospective Buyers

Interested ...view middle of the document...

 Confidential Information Memorandum (CIM)
• Detailed written description of the target which serves as the primary marketing document during the process • Often 50 or more pages in length • Special version often generated for competitors with whom the seller may be concerned about sharing certain sensitive information
Organization and Preparation First Round Second Round Negotiations and Closing

Auction Process Overview

Confidentiality Agreement (CA)
• A legally binding contract between the target and each prospective buyer that governs the sharing of confidential company information • Typically drafted by the target’s counsel and distributed to prospective buyers along with the teaser, with the understanding that the receipt of more detailed information is conditioned on execution of the CA • Negotiated with stakeholders
Auction Process Overview Organization and Preparation First Round Second Round

• Typical contents:

• Use of information – states that all information furnished by the seller, whether oral or written, is considered proprietary • Term – designates the time period during which the confidentiality restrictions remain in effect • Permitted disclosures – outlines when the information can be shared and with whom • Return of confidential information – mandates the return or destruction of all provided documents • Non-solicitation/no hire – prevents prospective buyers from soliciting to hire (or hiring) target employees • Standstill agreement – for public targets, precludes prospective buyers from making unsolicited offers or purchases of the target’s shares • Restrictions on clubbing – prevents prospective buyers from collaborating with each other or with outside financial sponsors/equity providers without the prior consent of the target (in order to preserve a competitive environment)

Negotiations and Closing

Initial Buyer Contact
Send Teasers and CAs Prospective Buyers CAs Returned Usually Distribute CIM completed by a Occasionally senior banker negotiate revised Prospective with whom the CA with buyer gets fuller buyer has a prospective picture of the relationship; can buyer company, starts be a cold call their modelling process
Bids received are defined by terms of bid procedure letter: • Indicative purchase price (typically presented as a range) and form of consideration (cash vs. stock mix) • Key assumptions to arrive at the stated purchase price • Structural and other considerations • Information on financing sources • Treatment of management and employees • Timing for completing a deal and diligence that must be performed • Key conditions to signing and closing • Required approvals • Buyer contact information

Auction Process Overview

Organization and Preparation

First Round

Second Round

Negotiations and Closing

Development of Management Presentation
• Presentations to be given to...

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