Best Practice Tradecraft in M&A Transactions

Part One:  Sell-side best practice

Why businesses are sold … and how

• Why trade sales are the most common choice

• Key questions for sellers to understand

The adviser’s role

• What a good adviser will add

The importance of good preparation

• Even the best businesses benefit from preparation – why?

• Testing readiness for the demands of the sales process

• How good preparation goes to value and execution

• Contingency planning and stakeholder management

• Case study: ‘Managing’ without preparation

• Case study: the consequences of poor preparation

Valuation basics

• The principles and main methods of business valuation …

• … and why valuation tends to come back to EV: EBITDA multiples

• Sourcing multiples

• The ‘bridge’ from EV to equity

• Why should the seller should lead on every aspect of value

The sale process: fundamentals and choices

• Generic M&A process overview

• What’s fixed and what can be flexed

• Principles of information flow

• Key selling documents: teaser and Information Memorandum

• Customised sales messages for each buyer

• Expectations for indicative and final offers

• Case study: a classic process

• Case study: a bespoke process

Due diligence from the seller’s perspective

• Diligence in the M&A process

• Contrasting buyer-led and vendor-initiated due diligence

• The potential breadth of due diligence: the common areas, and those less often considered

• How due diligence findings can affect a deal

• Interaction with warranties in the SPA and the disclosure letter

Seller’s tactics for driving the price

• Bespoke sales messages to each buyer: selling the combination as well as the target

• Controlling the process, setting the rules and deadlines

• Presenting EBITDA with appropriate adjustments to maximise value

• The place and time for the ‘Why pay more’ communication

• A framework for resolving issues and crystallising a deal

• Case study: an auction which drove the price up 70%

Heads of agreement

• Time, place and purpose

• What good Heads look like

Finalising the price – cash, debt and working capital

• The seller’s perspective on the equity bridge

• Choosing the reference balance sheet

• Permitted leakage

• Where to expect buyer challenges

• Locked box – where it may (and may not) be appropriate

Part Two:  Buy-side best practice

Why buy? Exploring buyer motives and ambitions

• Acquisitions and corporate strategy

• Types of transaction: Defining objectives

• Research and targeting

• The goal is not growth but value creation …

• … how is this measured? Explanation of RoIC-WACC

Do buyers need an adviser?

• Exploring what an adviser can add

• Case study: successful expansion through M&A – from Europe to Global

Valuation from the buyer’s perspective

• Debating points

• Synergies

• Cost savings and calculating ‘day 1 EBITDA’

• Assessing the impact on the buyer’s P&L … and their own valuation

• Earn-outs: a way of bridging a value gap

Tactics in an auction bid process

• How to ‘play well’: becoming someone to do business with

• Working with limited information

• Presenting your indicative offer

• Approaches to a negotiation

• Case study – how not to do it

Making a pre-emptive approach (outside a formal process)

• How to position a bilateral approach

• Being fully prepared – questions and challenges to anticipate

• Making the approach

• Building credibility: key messages

• Identify and address all stakeholders

• Case study – successful engagement

Tax structuring

• Overview of key issues

Buying from the administrator, or in a distressed situation

• Issues likely to arise

Due diligence

• Buyer’s perspective

• Checklists/ key principles

• Good (and not so good) practice: avoiding ‘confirmation bias’

• Managing and coordinating diligence streams

• ‘Post-deal’ due diligence: a potentially valuable service

• Case studies: lessons from some famously bad deals

Finalising the price: buyer’s perspective

• Debating points on cash and debt

• Dealing with transaction costs and ‘leakage’

• Where to challenge the seller on the working capital benchmark

• Completion accounts – problems to head off

• Completion accounts and locked box comparison …

• … and why the outcome on price should be identical

SPA: The legal framework – key commercial matters for buyers (and sellers)

• Defining the transaction

• Warranties and disclosure; interaction with due diligence

• Warranty limitations: time, givers, value thresholds

• The true value of warranties

• The place of buyer protections: escrows/ retentions, indemnities and a MAC clause

• Warranty insurance – a tool for both parties

Training Objectives

• Build confidence and understanding of every aspect of M&A transactions

• Insight into what bringing a business to market entails and what to expect once the process commences

• Help principals and their advisers appreciate the complex issues and choices involved in buying and selling a business

• Detailed focus on the transaction process and the choices at every stage

• Due diligence investigation, valuing a target, and how to complete a deal

• The content will allow practitioners with less experience to accelerate their learning of the M&A process, through discussion of tradecraft, case studies and best practices

• Ultimately, it is a walk-through of every aspect of buying and selling – a practical guide to identifying and successfully negotiating M&A deals

Training Course Summary

M&A is widely practised but not always well understood; many have a basic understanding of what a deal entails but lack insight into the details, the choices at every stage, and the nature of the work involved.

Transactions are a high-stakes business for both parties. Successful consummation is a landmark event for both parties. However, deals are frequently time-consuming, and the costs of failure are high.

A key theme in the course material is therefore around how sellers and buyers can ensure that they are truly prepared to commit to a transaction process. The bulk of the material is then around choices, behaviours and objectives at each stage of the process itself. This is supported by reference material to underpin value discussions and due diligence investigations. Lastly, the material focuses on all the details around closing a transaction, including the commercial aspects of the main legal documents.

Tools to help the parties resolve difficult issues are highlighted throughout.

Best Practice in M&A is a practical guide to all aspects of the M&A process and will be useful to anyone building a career in M&A, whether as an adviser or client.