Successful merger and acquisition transactions rely on advanced preparation. M&A transactions are often stressful and time-consuming for any company and the management team. While this is true, there are several things businesses can do to maximize the likelihood of a successful process.
The company that is selling needs to insist that the proper NDA (non-disclosure agreement) is signed early during any talks with a potential buyer. Also, the NDA should work to provide a non-solicitation provision for employees.
It’s smart for a business to hire an investment banker to help with the M&A process. An investment banker is helpful for finding potential buyers and serving as an intermediary during negotiations.
Be sure the banker provides a list of the most likely buyers. It should include annotations related to the relationships they have with specific buyers. It’s also necessary to scrutinize the ?standard? form of engagement letter. Usually, these are favorable to the banker, but they can be negotiated.
It is crucial that quality and experienced mergers and acquisitions counsel is hired when selling a company. The lawyer that is chosen for the job needs to be a full-time M&A lawyer. The existing counsel the company has may not be right for an M&A transaction.
Usually, it’s best to have someone other than the CEO negotiate the terms of the M&A. That’s because of the potential conflict of interest that may exist. It’s best to have the established M&A Committee of the Board handle the process. In an ideal situation, the process will run as an auction to help increase the possibility of improved prices and terms. From the perspective of the seller, it is smart for the initial merger agreement to be created by the counsel of the seller.
The Letter of Intent
The buyer will usually want to secure a deal with a letter of intent that includes an exclusivity period that lasts for 30 to 60 days. Usually, these will not be in the seller’s best interest, unless of course the terms are extremely detailed and set forth in this letter and if the period of exclusivity is shorter.
With an M&A process, there is no question that this can be confusing and time-consuming. Being informed and knowing how to make the process easier is essential. Keep the tips here in mind to achieve the desired results.