How M&A advisors can build the best deal for your business
Authored by Mike Milani
Do-it-yourself mergers and acquisitions (DIY M&A) has become a symptom of many failed privately held company sale transactions. In these situations, company owners and managers have attempted to manage their own sale process without assistance from a lead sell-side financial advisor and with limited assistance from their other deal professionals.
In a typical situation, the business owner is approached by a potential buyer and believes that he or she can navigate and negotiate a sale process with accounting, tax and legal advice. Unfortunately, a large number of these one-to-one negotiations, which business owners mistakenly believe will save time and money, are ending without a closing, resulting in a very frustrated and discouraged seller.
Reasons for DIY M&A failures
- Lack of negotiating leverage with a single buyer who is aware that there are no other competing offers
- Perceived or real re-trade of transaction value and terms
- Due diligence delays, issues and findings due to insufficient upfront preparation and limited bandwidth to facilitate information flow
- Deal process fatigue as the seller attempts to balance managing a sale process while operating their business
Remedies for success
- Retain a lead sell-side advisory team including investment banking, legal, accounting and tax professionals
- Work with your advisors to determine the potential range of enterprise value (the headline sale price), pre-tax and post-tax equity proceeds (the net amount of money for the seller) and the desired key transaction terms
- Assess the benefits and costs of running a sell-side process that includes a number of strategic and financial buyers
- Run a sale process with multiple bidders with a focus on:
- Maximizing value
- Optimizing transaction terms and deal structure
- Minimizing closing risk
In many instances, a seller can benefit from working with an investment banker who can lead a well-controlled and time-efficient sale process, which could include:
- Developing sophisticated marketing materials (i.e., teaser, confidentiality agreement, confidential information memorandum and management presentation)
- Contacting strategic and financial buyers, distributing marketing materials and gathering and vetting indications of interest
- Preparing the management team for meetings with potential buyers and coordinating the due diligence process and data room for both the seller’s and buyer’s deal advisors
- Assisting the seller in negotiations of transaction documents with the seller’s legal counsel
In nearly all instances, the additional enterprise value and enhanced transaction terms driven through the investment banker-led process will more than offset the advisory fees paid for the successful transaction.
For more information on this topic, or to learn how Baker Tilly Capital specialists can help, contact our team.