Last month In MidMarket Talk, Dealmakers Planning for a Successful Integration: First Steps in Carrying Out the Integration by Aligning the Executive Group described essential steps in bringing together the Executive Group and getting them working together as a team. The executive team for the new organization needs to make some additional critical decisions on moving forward with the new organization.
Minnesota’s mergers and acquisitions (M&A) market has been strong the past few years, but can this trend continue in 2018? Will buyers continue to be willing and able to pay the high valuations we’ve seen recently? How will the recent tax changes impact the M&A market? Based on national historical trends and expert predictions for 2018, following are some predictions about what this means for Minnesota companies.
After the purchase is completed, you can wash your hands and move on to retirement, right? In some cases, yes. In others, not necessarily.
As the seller, you know all the little details about your business. You have years of experience. The buyer wants to gain access to your knowledge of the business so he or she can profitably run it. Typically, most buyers and sellers choose to include a consulting agreement in the purchase transaction, giving you (the seller) a role in the company post-sale, sharing your knowledge with the buyer.
In the purchase agreement for the sale of a business the term “net working capital” typically refers to the minimum capital required to maintain current operations of the business enterprise. Calculating the amount of net working capital is more than just current assets minus current liabilities. It involves complex negotiations between both the buyer and you (the seller), and each of your financial advisers, lawyers, and accountants. In these negotiations, you determine which assets and liabilities should be included in net working capital.
Albert Einstein is quoted, “I used to go away for weeks in a state of confusion”, and for those of us who have successfully managed and led carve-out deals – that state of confusion is the biggest challenge to overcome. Time is precious, and a couple of weeks of confusion leads to delays and costs with technology service agreements, operations efficiencies, marketing and branding strategies, HR policies and packages, finance reporting and banking covenants – so it is best to get those states of confusion out of the way prior to Day 1.
Anyone interested in giving back some of the money from the sale of your company? No?
Money has been exchanged. The business has been acquired. The transaction is complete. Golf and sailboats galore. Any issues and losses arising after this point fall onto the buyer.
Before getting into the due diligence process and other key components of entering a purchase agreement, the buyer will typically provide you with a term sheet or letter of intent (LOI). In this document, the buyer will express his or her interest in entering the transaction and will outline the legal and commercial terms, including the price and structure of the purchase. A term sheet or LOI can guide the purchase process by focusing negotiations on the key terms and identifying deal breakers.
Last month In MidMarket Talk, Dealmakers Planning for a Successful Integration: Performing Cultural Due Diligence (CDD) focused on providing better understanding the concept of Cultural Due Diligence (CDD). Now we can turn our attention to some of its nuts and bolts and how the process of CDD might look like as it plays out in the real world of mergers and acquisitions.
Being an M&A advisor is an experience of constant learning. No matter how long I work in this profession — and I’ve been doing it for more than 20 years — I never cease to encounter situations that present unforeseen challenges.
I recently participated in a forum with five other experienced M&A professionals in which we talked through our experiences of managing risk in the mergers and acquisitions process. By exchanging stories of deals gone wrong, we touched on some common points about the work we do.