What to Expect During the M&A Process

Many of the clients that come to George & Company have never bought or sold a business before, so they are unfamiliar with the M&A process. Fortunately, they have come to the right place. First-time buyers and sellers will benefit greatly from hiring an M&A intermediary to facilitate the process and provide expertise.

The following is a broad overview of the basic steps involved in successfully completing an M&A deal. It is important to keep in mind that oftentimes a deal goes through unforeseen changes and the steps are not always linearly laid out as seen below. However, it will be helpful for those interested in buying or selling a business to understand what to expect during the M&A process.

1.    Collect Company Data

The M&A advisor will first collect data on the client in order to become familiar with their needs and desires. This will allow the intermediary to determine if the buyer or seller is an appropriate M&A candidate. Once the client is approved, the intermediary will use this data to seek out potential targets.

2.   Assign Valuation Range 

Once the intermediary is familiar with the company in question, he or she will perform a valuation on the business in order to appropriately match targets with the seller. In the case of buyer representation, the valuation will be performed on the company after the target has been established.

3.   Collect Data on Targets 

It is important for the intermediary to determine the type of targets that are appropriate for the acquisition before beginning to contact them. A list of potential targets will be made based on the buyer or seller’s desires as well as valuation numbers. An M&A advisor will be able to find the most suitable potential targets due to his or her expertise on matching buyers and sellers as well as an exclusive list of targets at their disposal.

4.   Contact Potential Targets 

The advisor will assist in reaching out to potential targets. It is the M&A intermediary’s job to strategically market businesses for sale without revealing too much information that could negatively affect the reputation of the business. This is why it is recommended that an M&A expert handle representation of a seller in order to effectively entice buyers without providing extensive information.

5.   Sign a Confidentiality Agreement 

Once a relationship with a specific target has been established, it is critical that a confidentiality agreement between the two parties be drafted before moving further. This will prevent either side from leaking classified information to others.

6.   Request or Write an LOI 

The buyer must submit a Letter of Intent (LOI) to express interest in the target company and describe their intentions. When the LOI has been signed, it is an indicator that the deal is becoming serious. While the LOI is a non-legally binding document, it will often include a clause signed by both parties agreeing to fidelity during the entirety of the deal process.

7.   Request or Write an IOI

The Indication of Intent (IOI) is also written by the buyer and contains specific valuation ranges and other key agreement points such as the post-closing plan.

8.   Negotiation 

When the buyer submits the IOI, it is highly unlikely that the seller will be ready to accept all terms presented. A negotiation is necessary in order to bring both parties to an agreement on price and other management elements. M&A advisors are recommended for this step because of their immense amount of experience in negotiations to find the optimal price for their client.

9.   Perform Due Diligence

Once the deal has been negotiated, the buyer must perform due diligence on the company in question. Due diligence includes an analyzation of the business’s documentation, bookkeeping, contracts, debts, and other pertinent information, in order to demonstrate the appropriate value and merit of the company.

10.  Draft a Purchase Agreement

After due diligence has been performed and both parties agree to move forward with the deal, a purchase agreement must be drawn up and the pre-closing process begins. This will determine the final purchase price and bind both parties to a legal contract.

11.  Sign the Agreement

The purchase agreement must be signed in order for the deal to close. At the closing, the payout price and business ownership will be exchanged and the transaction will close.

12.  Post-Closing Facilitation

Typically once an M&A deal has closed, it is rare that the buyer and seller would shake hands, walk away, and never communicate again. Oftentimes, post-closing price adjustments must be made or escrows must be paid. In the case of a merger, the buyer will also have to undertake the task of merging two different companies. The M&A advisor will also be involved in any post-closing issues that may arise.

Now that you have become familiar with the basic M&A process, it is time to begin your next venture as a business buyer or seller. George & Company offers both buyer and seller representation services, and our expertise will be able to guide you through the entire process, even after the deal closes. Contact us today, and we can confidentially lead you through the entire complex M&A process with ease.