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M&a Process

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

Agenda
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 Buyers Sign Confidentiality Agreement

Interested Buyers Receive In-Depth information and Submit a Bid

Seller and Advisor Choose Participants in Second Round

Management Presentations and Buyer Due Diligence

Second Bids Submitted

Price and Sale Agreement Negotiated

Deal is Closed

Stakeholders
Seller Incentive: Highest Multiple
• Private Equity Fund • Large Corporate Entity • Entrepreneur

Advisors

Incentive: Highest Fee

• Investment Bank • Legal Counsel • Auditors and Consultants

Buyer

Incentive: Lowest Multiple

• Private Equity Firm • Large Corporate Entity
Auction Process Overview Organization and Preparation First Round Second Round Negotiations and Closing

Broad vs. Targeted Processes
• Broad Process
• • • • •

20/20 rule: generally, 20% of the deal value should not be greater than • Targeted Process 20% of the • Buyer universe is limited to strong strategic fits prospective • Buyers are likely aware that the company is in play buyer’s current • Financial resources are vetted to a greater degree fund

Maximize universe of buyers approached Approach both strategic and financial buyers Designed to maximize competitive dynamics

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