M&A Video Series:
PREPARING A COMPANY FOR THE M&A PROCESS | MAINTAINING BARGAINING POWER DURING THE M&A PROCESS
CEO'S IMPORTANT ROLE IN THE M&A PROCESS | DUE DILIGENCE DURING THE M&A PROCESS
Preparing a company for the M&A Process
George P. Shenas, Esq. hosts David B. Duval, President of Claiborne Advisors, Inc.
Part I: Undertaking Pre-Sale Preparation Is Very Important, Especially in Difficult Times
George and Dave discuss the investment banker's perspective how to prepare your company for sale, even in difficult economic times. Dave explains the importance of educating the seller regarding the merger and acquisition process, generally, and emphasizes that the earlier a CEO starts laying groundwork – even several years before an actual sale – the more likely it becomes that the company is sold at a premium. George asks what a CEO should do to enhance enterprise value. Dave addresses the challenges of adjusting the way the seller operates a "family run" business, as well as defining the company's "value proposition" for potential buyers. Dave and George identify common pitfalls faced by sellers, specifically: weak financial reporting (nothing more than tax returns); delaying much-needed improvements to operating procedures; and over-relying on "recast" financials rather than focusing on verifiable historical results. Dave emphasizes the importance of obtaining reviewed statements from a CPA firm, along with preparing a detailed management letter which puts data into the proper context.
Part II: Dressing Up for the M&A Party - How an Investment Banker Can Help You Market Successfully
George and Dave discuss how to approach the marketing of a company. Dave discusses “dressing up” the company for the “M&A party,” by systematically eliminating or reducing risks that might jeopardize enterprise value. George asks how a company can identify likely buyers in the market, and Dave explains how a seller shouldn’t limit itself to dealing with only one potential buyer – even in situations where a buyer has initiated the process by tendering an unsolicited offer. Dave and George then each make some suggestions on where to find strategic buyers and how to identify and leverage potential synergies. Dave emphasizes the importance of having a realistic valuation of a business, as well as the potential acquisition pricing that the market will support.
Part III: Get to the High End of the Price Range through 'Stage Management'
George and Dave discuss the actual posturing of a company for sale, including steps typically taken by investment bankers to position the seller at the high end of the market range. Dave stresses that sellers "fighting the tape" in terms of setting the price range is counterproductive, because, practically speaking, buyers determine the range in which company's value will fall (this is not to say that a seller can't improve its price within that range by "stage management"). George then asks about the delicate task of permitting the buyer to talk with key customers, and Dave shares his preferences on timing and execution. Finally, Dave shares his views on maintaining confidentiality during the M&A process.