M&A Acquisition Process

Question 1

What is a Business Plan?

Answer 1

Articulates a mission or vision for the company

Question 2

What is a Business Strategy?

Answer 2

Lays out how to realize the mission for all firm’s stakeholders over the long-term

Question 3

What does the implementation strategy discuss?

Answer 3

How to more specifically execute the business strategy

Question 4

What is the M&A Plan

Answer 4

A type on implementation strategy that shows the motivation for the acquisition and when its achieved

Question 5

Functional Strategies

Answer 5

Describes in detail how each major function in a firm supports the business strategy

Question 6

Contingency Plans

Answer 6

Alternative plans to the current firms Business strategy, contingent on trigger points

Question 7

What is the 10 phase process

Answer 7

1. Business Plan
2. Acquisition Plan
3. Search
4. Screen
5. First Contract
6. Negotiate
7. Integration plan
8. Closing
9. Post-closing Integration
10. Evaluation

Question 8

Negotiation

Answer 8

crucial phase of the M&A process

Question 9

Closing

Answer 9

involves gaining all the necessary regulatory and financing approvals

Question 10

Post closing Integration

Answer 10

a key phase where the integration plan is implemented, important to realize all the assumptions used when make the purchase decision

Question 11

External Analysis

Answer 11

How the firm can compete within its chosen markets

Question 12

Internal analysis

Answer 12

Self-assessment of the firms Strengths and Weaknesses relative to competition

Question 13

Mission statement

Answer 13

Summarizes where and how a firm chooses to compete based on values, beliefs, and SWOT

Question 14

Set Objectives

Answer 14

Quantifies what perfomance measures

Question 15

Business Strategies

Answer 15

Defines how the business intends to compete

Question 16

Implementation Strategy

Answer 16

How the firm puts the Business Strategy into practice

Question 17

Functional Strategies

Answer 17

Clearly defines roles/responsibilities are required resources to support each functional area of the business strategy in the short-term

Question 18

Strategic Controls

Answer 18

Monitor actual performance, implement incentive systems

Question 19

Implementation process has these 5 components: (OPIAS)

Answer 19

Organic growth (internal resources)
Partner with other firms
Invest in other firms
Acquire another firm
Swap assets with a firm

Question 20

Acquisition plan

Answer 20

Focuses on short term tactical issues vs long term strategic issues (search criteria, resource assessment, market analysis)

Question 21

Search Process Step 1

Answer 21

Establish a small number of primary selection criteria; industry, size of transaction, geographic area

Question 22

Search process step 2

Answer 22

search databases and corporate registries for targets using the selection criteria

Question 23

Search is performed by?

Answer 23

Investment bank

Question 24

Screening

Answer 24

a refinement of the initial search process using secondary search criteria

Question 25

First contact

Answer 25

keep a profile of each possible target and reasons why they might consider a proposal

Question 26

First Contact - Put into play

Answer 26

rumors circulate that there is buying interest on a company- other firms become interested

Question 27

First Contact - Discussing Value

Answer 27

Value is initially discussed in a range using multiple valuation techniques, valuation multiple

Question 28

First Contact - Preliminary Legal Documents

Answer 28

If target firm is open to a friendly deal, parties negotiate Confidentiality agreement or LOI

Question 29

First contact - Confidentiality Agreement

Answer 29

Mutually binding, both companies share non-public data

Question 30

LOI

Answer 30

Includes responsibilities of both parties with expiration date and terms and conditions

Question 31

LOI - No shop

Answer 31

prevents the seller firm discussing price with other buyers to avoid competitive process

Question 32

Negotiation

Answer 32

Most complex aspect of the acquisition process

Question 33

Negotiation - Due Dilligence

Answer 33

reviewing legal documents to "know what you're buying"

Question 34

Negotiation - Refining Valuation

Answer 34

Years of historical financial data should be adjusted for any non-recurring items or gains

Question 35

Negotiation - Total Consideration

Answer 35

The payment to shareholders which consists of cash, stock, or both

Question 36

Negotiation - Net Debt

Answer 36

the market value of target's debt, less cash and securities on balance sheet

Question 37

Total Purchase Price / EV

Answer 37

Represents the total investment made by acquiring firm

Question 38

Negotiation - Net Purchase Price

Answer 38

Total purchase price + other assumed liabilities - sale of assets

Question 39

Integration Plan - Choosing the integration manager

Answer 39

The buyer/Acquirer will designate an integration manager with good people and project skills

Question 40

Integration Manager Will

Answer 40

Identify and figure out how to retain key managers, vendors and customers

Question 41

Closing involves (1)

Answer 41

Completing the Definitive Merger Agreement or Plan of Agreement

Question 42

Closing Involves (2)

Answer 42

Obtaining all necessary SH, Regulatory approvals and Third-party consents

Question 43

DMA

Answer 43

The cornerstone of closing documents, indicates all rights and obligations of the parties both before and after the closing

Question 44

Post-Closing Integration

Answer 44

Most important phases in the acquisition process

Question 45

5 Categories important to post-closing Integration (CESEC)

Answer 45

1. Communication Plans 2. Employee Retention 3. Satisfying Cash Flow requirements 4. Employee Best Practices 5. Cultural Issues

Question 46

post-closing Integration- Communication Plans

Answer 46

Crucial to keeping employees, maintaining morale, and productivity

Question 47

Post closing Integration - Employee Retention

Answer 47

Maintaining managers should be a top priority

Question 48

Evaluation

Answer 48

ensures the acquisition is meeting expectations