Merger and Acquisition is an important and integral part of any business. Small and mid-sized businesses have to prepare themselves, and this can be a pretty difficult task to do. The backbone of a successful merger and acquisition is advanced preparation, excellent and experienced advisors, and a dedicated management team. You also need to have a good understanding of the key business areas as well as legal and financial issues that will be a part of the overall merger and acquisition process.
Here are some of the preliminary steps that you can take which are required for a private company that is opting for sale in the market.
Develop a Business Overview
The companies that need to be sold develop an overview of the Executive Summary of their business. This can be in a PowerPoint presentation. All the information related to the business is showcased here. It includes the company’s products, team, technology, market opportunities, and financials. Some of the topics that you can include in this deck can be the company overview, mission and vision of the company, the team, the problem, the product, the customers, technology, business model, and marketing plan.
You can also use some of the tips mentioned below.
- The deck should not be more than 15 to 20 slides as the buyers have a limited attention span. More information than the mentioned above can be included.
- The slides should not be too wordy.
- Do not include too many financial details of your business.
- Avoid covering everything in the pitch deck. The virtual presentation that you prepare will give you an opportunity to add only the key information.
- Do not have a poor layout of your pitch deck. Do not add bad graphics or look and feel that is of low quality.
- Convince the viewer why the business opportunity is large.
- Tell a compelling and memorable story to the viewers.
- The font size, colour, and styling throughout the slides must be highly consistent.
The company for the sale must also develop dedicated decks such as the financial deck, product deck, and service deck. These can be detailed presentations for the buyers. This deck is developed after the first presentation is developed, and the buyer wants to learn more about the company.
Prepare for Extensive Due Diligence by the Buyer
The Merge and Acquisition activities demand a significant amount of due diligence by the buyer. Before anyone commits to the transaction, the buyer wants to make sure that it knows what it is buying. The company also want to make sure all the obligations that it is assuming. Also, it is important to understand the nature and extent of the selling company’s contingent liabilities.
The buyer also needs to know all the problematic contracts of the business along with all the litigation risks, as well as intellectual property issues. The focus of the buyer, in this case, is specifically true in the case of private company acquisitions in which the selling company is not being subject to the scrutiny of the public markets.
The selling company must be better prepared to respond to the questions by carefully planning for the buyer’s due diligence. This can be done by efficiently managing resources dedicated to the diligence process and properly anticipating all the related issues that may arise.
Prepare an M&A Online Data Room
In the early stage of the M&A process, the selling company must set up an online data room. This helps in efficiently dealing with the due diligence process. The online data room is an electronic house that store all the key business documents. This place is populated with the selling company’s important documents such as corporate documents, financial statements and contracts, information, as well as intellectual property documents. You also get to know all the employee information, capitalization table, and much more.
All the valuable information is present here in a systematic and controlled manner and in a manner that helps to preserve confidentiality. All the data from this place can be accessed 24 hours a day and as per the convenience. The data rooms are especially useful if the business competitors are granted access to them. Most of the data rooms can track records of all the people that have access to the data rooms along with the things they have accessed. All this information can be later used to understand the level of interest in the company that needs to be sold.
Prepare Draft Disclosure Schedules
One integral part of the M&A transaction is the disclosure schedule. These schedules contain all the information that is required under the acquisition agreement. It also provides a means for the selling company to disclose all the expectations to the selected representations and warranties. An incorrect or incomplete disclosure schedule can lead to a breach in the acquisition agreement and potentially entitle the buyer to walk away from the transaction before closing.
On the other hand, well-drafted disclosure schedules will provide substantial protection against the post-closing allegations that the seller breached its representations and warranties.
Review the Seller’s Financial Statements and Projections
Another important diligence activity that the buyer needs to undertake is to review all the financial statements of the company that is being sold. The buyer needs to be comfortable with all the financial statements that they are prepared as per the generally accepted accounting principles (GAAP) that are being applied constantly.
The company that is being sold must be prepared to provide audited financial statements. This is important as they will afford a buyer with a higher degree of confidence in their accuracy as compared to the unaudited financials.
Another thing that is important in such cases is the selling company needs to plan on how to get multiple bidders to the table. This will help the seller to get the best deal. Also, you can interview and hire an amazing M&A lawyer along with an amazing legal team. You can also consider hiring an M&A financial advisor or an Investment Banker. So, here the some of the best things that you can do for the best M&A activity.
Source – Forbes