Mergers & Acquisitions: How to Negotiate the Purchase or Sale of a Business
Build Your TeamYour Team of Advisers Should Include:
Investment Banker/Broker and an
Experienced M&A Lawyer
Gather Information about Your Company and Potential Buyers or SellersSources:
Internet (Websites; Filings; Analysis) and
Talk to Your Team of Advisers
What is your company worth? If you don't know, then
Go Back to Step 2!
How much do you need from a sale?
Financial and Estate Planning are an essential part of this process.
Are you ready to sell? Is you Company ready? Are you mentally and emotionally ready to let go?
What are your Acquisition Criteria?
Target criteria and
Stick to your criteria!
Do you have an Acquisition Integration Plan? It is critical to the success of any M&A deal.
Who Are the Potential Buyers? (Strategic and Private Equity Groups).
Research their Plans --
How do You Fit into those Plans?
Contact Potential Buyers (sales call)
Get on their Target List
Who Are Your Potential Targets?
Screen Against Acquisition Criteria;
Make Contact (sales call); then perform
Due Diligence and Screen Again. Feedback loop.
Negotiate the TermsFocal Point: Letter of Intent ("LOI") --
Lock up the Deal;
Cap the Purchase Price;
Open the Door to Due Diligence; and
Introduce "Other Concepts."
Identify Price and Terms;
Control Due Diligence;
Flush out "Other Concepts"; and
Cap Post-Closing Exposure (Indemnification).
Seller's Leverage Is Greatest at LOI, because
The Buyer wants your company and
wants to lock you up to
eliminate competition for the deal.
You are negotiating with Buyer's Management, who is
motivated to get deals done.
After the LOI, the lawyers take over,
and you know how they are!
Close the DealBuyers:
Due Diligence + Documentation
= Corporate Root Canal.
Set tight deadlines -- push the ball
to Force Seller Errors.
After Due Diligence, Recheck:
Target criteria and
Are Price/Term Concessions Needed?
Discipline, not Sharp Dealing.
Focus on Integration Plan.
The deal may never close, so
Keep your "walk away" power.
Keep talking to the Buyer --
Multiple Lines of Communication,
but Unified Message.
Mind Your Business!
You cannot afford a hiccup; it
Kills your price (or the deal). Remember,
Strong Business =
Strong Negotiating Position.
Good Luck with
(C) 2008 Rhys T. Wilson, Esq. All Rights Reserved.