Mergers and acquisitions can be difficult to carry out effectively. Strong preparation, experienced advisors and a dedicated management team are all essential for a successful deal. Whatever your role in M&A, here’s a simple break down of your key responsibilities:
The one with the asset
If you are inexperienced in M&A deals, the prospect of selling the business you have spent so many years creating can be rather unnerving.
Before you embark on your sales process, it is massively encouraged that you get your “house in order”. You should ask yourself: If a buyer knocked on my door tomorrow and wanted to start due diligence, could I find all the necessary documents? Are they up to date? Has everything been properly signed and dated? The inability to produce these documents for due diligence could make the buyer worry about the state of the business from the outset.
To ensure your merger or sale is successful, it’s advised that you prepare well in advance and seek help from an investment banker and M&A lawyer to assist you through what can be a difficult process.
M&A transactions can be time consuming and stressful for a company and its management team. Hiring an investment banker to advise you through your deal can be extremely valuable. They can help find prospective buyers and act as intermediary in negotiations. When looking to hire a banker you should make sure they have provided you with a list of who they think the likely buyers could be and find out if they have any existing relationships with them. You must negotiate and scrutinise their form of engagement letter as it has great effect on the quality and depth of the investment banker’s duties to you.
It is your responsibility to make sure all your necessary documents are available for the data room. If, like advised, you have got your house in order, then this shouldn’t be too much of a chore for you. Virtual data rooms make M&A deals a lot faster and more efficient and your banker will probably have sought one out for you to use. With a virtual data room you can just upload the required documents remotely from wherever you are and there’s no need to travel to a physical data room. You can also log into the data room from wherever you are 24 hours a day to keep up to date with how your deal is doing.
When you start considering a transaction for your business, it is critical that you hire knowledgeable, experienced M&A counsel for the selling of your company. The lawyer you hire should be a full-time M&A lawyer with plenty of experience. Keep in mind, that your existing counsel may not be appropriate for the M&A transaction.
Ideally the M&A process will be run as an auction to heighten the likelihood of better terms and price. From your perspective, it is desirable for the first draft of the merger agreement to be drafted by your counsel; however, many buyers will insist otherwise. It is common for a buyer to want to “lock up” a deal via a letter of intent with an exclusivity period of 30-60 days; these are usually not in your best interests unless it has very detailed terms and a short exclusivity period so beware.
Most of the laborious jobs can be divvied out to your hired banker and lawyer. You must keep an eye on your company to make sure the M&A process is not distracting your employees or detract from day-to-day running of the business.
The one with the money
As an investment banker or financial advisor, you’re pretty much running the M&A show. It’s your job to match companies and assets with bidders and to ensure everything is safe, including your reputation. You will either be representing the seller or the buyer and it is your responsibility to establish fair value for the companies involved in the transaction.
When your client is the one selling their company, they come to you to help them make lots of money. Sometimes they’ll know exactly who, or at least have an idea of who, they want to sell to but other times they will be unsure and will just be desperate to sell their company as fast as possible. When a client comes to you seeking help to buy a company, they want your help to finance it. Again, some clients will know exactly what they want to buy or are already in discussions with a seller, other times they have no idea and will want you to do all the leg work for them.
Market conditions play an important role in deciding the best time for a transaction and it is up to you to decide when the conditions are optimal to get to the value that your client wants. It is your job to tell potential investors why they should acquire a particular company, so you should conduct extensive research to understand your client’s needs. You will need to recommend the proper valuation they should sell at, as well as invite multiple parties to bid for the company.
It is important for you to make the acquisition case as compelling as you can to get as many bidders involved in the due diligence process as possible. This will increase the likelihood of the deal concluding successfully.
Finding, collating and digitising a client’s documents can be a very lengthy process but it’s a process that must be done. You need to make sure no material is missed because this could stall the process later on. Using a virtual data room (like HighQ Dataroom) can speed up the process for you and make it easier for you to organise. You will be the main administrator of the data room and it will be up to you to decide what access and permissions different users have. You are involved in the M&A deal from start to finish, guiding your client through their transaction.
The one with the rule book
Legal issues are always at the forefront of M&A deals. As the lawyer, you are a very important advisor to both the seller and the buyer. When representing a buyer, the first step is to help the buyer focus on what it is they really want to buy. When representing a seller, you must make sure they understand the process and have people who can dedicate themselves to putting the transaction together. It is your job to be aware of the legal issues and inform clients how those issues affect their business or the deal.
Your key role is the management of any transaction risk; you must identify any risk, inform and advise your client of that risk and then do your best to mitigate that risk.
It is your job to carry out due diligence; this process is often time consuming and complex but it is integral to a successful transaction. You must investigate the accuracy of information passed from the seller to the buyer; this will establish the financial strength of the company. Your client will want to have some kind of security for their investment and it’s your job to arrange the financing; this investment could come from banks or other type of investors.
You negotiate and draft agreements and this will be done in conjunction with the client, the business that is bought or sold, other advisors and any financers. You gather all parties for the completion of the transaction, ensuring all assets have been covered properly by written documents that are correctly signed and witnessed. You finalise all post-merger registrations and procedures.
In summary
Whatever your role in M&A, preparation and communication are key in making sure your deal is successful. Whether you are the one with the asset, the one with the money, or the one with rule book, a significant amount of your time, effort and resources is required and using a virtual data room is highly recommended to ensure a faster and more efficient transaction.
