M&A Acquisition Process Flashcards
What is a Business Plan?
Articulates a mission or vision for the company
What is a Business Strategy?
Lays out how to realize the mission for all firm’s stakeholders over the long-term
What does the implementation strategy discuss?
How to more specifically execute the business strategy
What is the M&A Plan
A type on implementation strategy that shows the motivation for the acquisition and when its achieved
Functional Strategies
Describes in detail how each major function in a firm supports the business strategy
Contingency Plans
Alternative plans to the current firms Business strategy, contingent on trigger points
What is the 10 phase process
- Business Plan
- Acquisition Plan
- Search
- Screen
- First Contract
- Negotiate
- Integration plan
- Closing
- Post-closing Integration
- Evaluation
Negotiation
crucial phase of the M&A process
Closing
involves gaining all the necessary regulatory and financing approvals
Post closing Integration
a key phase where the integration plan is implemented, important to realize all the assumptions used when make the purchase decision
External Analysis
How the firm can compete within its chosen markets
Internal analysis
Self-assessment of the firms Strengths and Weaknesses relative to competition
Mission statement
Summarizes where and how a firm chooses to compete based on values, beliefs, and SWOT
Set Objectives
Quantifies what perfomance measures
Business Strategies
Defines how the business intends to compete
Implementation Strategy
How the firm puts the Business Strategy into practice
Functional Strategies
Clearly defines roles/responsibilities are required resources to support each functional area of the business strategy in the short-term
Strategic Controls
Monitor actual performance, implement incentive systems
Implementation process has these 5 components: (OPIAS)
Organic growth (internal resources)
Partner with other firms
Invest in other firms
Acquire another firm
Swap assets with a firm
Acquisition plan
Focuses on short term tactical issues vs long term strategic issues (search criteria, resource assessment, market analysis)
Search Process Step 1
Establish a small number of primary selection criteria; industry, size of transaction, geographic area
Search process step 2
search databases and corporate registries for targets using the selection criteria
Search is performed by?
Investment bank
Screening
a refinement of the initial search process using secondary search criteria
First contact
keep a profile of each possible target and reasons why they might consider a proposal
First Contact - Put into play
rumors circulate that there is buying interest on a company- other firms become interested
First Contact - Discussing Value
Value is initially discussed in a range using multiple valuation techniques, valuation multiple
First Contact - Preliminary Legal Documents
If target firm is open to a friendly deal, parties negotiate Confidentiality agreement or LOI
First contact - Confidentiality Agreement
Mutually binding, both companies share non-public data
LOI
Includes responsibilities of both parties with expiration date and terms and conditions
LOI - No shop
prevents the seller firm discussing price with other buyers to avoid competitive process
Negotiation
Most complex aspect of the acquisition process
Negotiation - Due Dilligence
reviewing legal documents to “know what you’re buying”
Negotiation - Refining Valuation
Years of historical financial data should be adjusted for any non-recurring items or gains
Negotiation - Total Consideration
The payment to shareholders which consists of cash, stock, or both
Negotiation - Net Debt
the market value of target’s debt, less cash and securities on balance sheet
Total Purchase Price / EV
Represents the total investment made by acquiring firm
Negotiation - Net Purchase Price
Total purchase price + other assumed liabilities - sale of assets
Integration Plan - Choosing the integration manager
The buyer/Acquirer will designate an integration manager with good people and project skills
Integration Manager Will
Identify and figure out how to retain key managers, vendors and customers
Closing involves (1)
Completing the Definitive Merger Agreement or Plan of Agreement
Closing Involves (2)
Obtaining all necessary SH, Regulatory approvals and Third-party consents
DMA
The cornerstone of closing documents, indicates all rights and obligations of the parties both before and after the closing
Post-Closing Integration
Most important phases in the acquisition process
5 Categories important to post-closing Integration (CESEC)
- Communication Plans
- Employee Retention
- Satisfying Cash Flow requirements
- Employee Best Practices
- Cultural Issues
post-closing Integration- Communication Plans
Crucial to keeping employees, maintaining morale, and productivity
Post closing Integration - Employee Retention
Maintaining managers should be a top priority
Evaluation
ensures the acquisition is meeting expectations
