#2 Chapter 6, Sell-Side M&A Flashcards
What are the main goals of a sell-side advisor in M&A? (3)
Achieve the optimal mix of :
* value maximization
* Speed of execution
* Certainty of completion
What is the purpose of an auction in sell-side M&A?
To market a target to multiple prospective buyers and test market value
What are the two types of auctions?
- Broad Auction
- Targeted Auction
What is a confidentiality agreement (CA)?
A legally binding contract that governs the sharing of confidential company information
What is a Confidential Information Memorandum (CIM)?
A detailed written description of the target, serving as the primary marketing document in an auction
What is a teaser in the context of M&A?
The first marketing document presented to prospective buyers to generate interest
Fill in the blank: A confidentiality agreement typically includes provisions governing the _______.
- Use of information,
- Term
- Permitted disclosures,
- Return of confidential information,
- Non-solicitation/no hire,
- Standstill agreement,
- Restrictions on clubbing
What is the initial bid procedures letter?
It states the date and time for submitting preliminary indications of interest and the information that should be included in the bid
What is the purpose of the data room in the second round of the auction?
To serve as a hub for buyer due diligence, storing detailed information about the target
The data room contains essential company information, customer and supplier lists, and environmental compliance certifications.
What is a ‘stapled financing’ in the context of M&A?
A pre-packaged financing structure prepared by the investment bank to support the sale of the target
It is designed to help buyers secure financing and signal support from the sell-side bank.
What is the main goal of the second round in the auction process?
To facilitate detailed due diligence and enable buyers to submit strong final bids
The process typically spans several weeks and varies based on the buyer’s profile.
What is included in the final bid procedures letter?
Guidelines for submitting a final,legally binding bid package including
* purchase price
* evidence of financing
The letter outlines stringent requirements for the final bid, including attestation of due diligence completion.
What does the definitive agreement represent in an M&A transaction?
A legally binding contract detailing the terms and conditions of the sale
It includes representations, warranties, pre-closing commitments, and closing conditions.
True or False: A fairness opinion is required before the board of directors can approve a public company offer.
True
The fairness opinion assesses the financial fairness of the transaction and is supported by detailed analysis.
What is the Hart-Scott-Rodino Antitrust Improvements Act of 1976?
A regulatory requirement for notifications and report forms for U.S. M&A transactions
It involves filing with the FTC and DOJ based on the size of the transaction.
Fill in the blank: In a ‘one-step’ merger transaction for public companies, target shareholders vote on whether to approve or reject the proposed transaction at a formal _______.
shareholder meeting
What is a two-step tender offer in M&A?
A public acquisition process that involves a direct offer to shareholders followed by a merger
It can lead to quicker completion if the buyer acquires a majority of shares.
What is the typical timing from signing a definitive agreement to closing in a one-step merger?
As little as six weeks, but often takes longer
The timing can be influenced by SEC approval and the mailing of documents to shareholders.
What role does the sell-side advisor play during negotiations?
Conducts analysis of final bids and facilitates negotiations with preferred buyers
The advisor seeks to maintain competitiveness and may negotiate with multiple parties.
What happens after the seller’s board of directors votes to approve the deal?
The definitive agreement is executed by the buyer and seller
A formal transaction announcement is made with key deal terms disclosed.
What might the buyer use to fund and close a transaction if permanent capital isn’t immediately available?
Bridge financing
This allows the buyer to close the transaction before securing long-term financing.
What is a negotiated sale in M&A?
A direct dialogue with a single prospective buyer rather than an auction process
This approach can move faster and is particularly compelling with strategic buyers.
