Understanding The M&A Process

How To Increases the LikelihoodBy Duane P. Donner II

The steps to selling a middle market company (companies with $10m to $500m in revenue) are generally not that well known.  Yet, there is a proven methodology that, when followed, increases the likelihood of a company obtaining a premium value and getting a deal done. Owners of companies typically see their universe of buyers consisting of fellow partners, employees, competitors, key customers, major suppliers, and perhaps local investors. While these are all valid options, there is also a vastly larger buyer universe consisting of domestic and international public and private companies as well as private equity firms. The challenge is not finding potential buyers, but finding the right buyer or investor. It takes a systematic approach to identify and connect with the best candidates.  At the outset, it is not always obvious who the best buyer might be, and there is a high probability that the owner has never met the buyer before.

Most are amateurs when it comes to selling a business since business owners tend to do it only once or twice. Institutional buyers (private equity funds and large corporations), on the other hand, have teams who buy and invest for a living. Consequently, they have a lot of experience getting deals done and shaping deal terms in their favor. Financial buyers acquire businesses for institutional and high net worth investors, and these shrewd buyers have invested over $2 trillion buying companies. Strategic buyers have a preference for acquiring small to medium‐size firms, and while these deals happen every day, it is a challenge for the uninitiated to get into this market.

At Founders, we believe the best way to overcome these disadvantages and achieve a premium valuation is to run a disciplined sell-side process.  A sell-side process creates a competitive market by presenting the company and soliciting offers from multiple pre-qualified and informed buyers. It sounds simple enough, but there are five major phases to creating a competitive deal environment with an incredible number of steps and nuances along the way.

Those five major phases are:

1. Preparation and packaging

2. Buyer research and development

3. Marketing and buyer communications

4. Negotiations and letter of intent

5. Due diligence and closing

It takes a lot of work, energy, and skill to plan and execute a successful transaction. Experienced M&A advisors manage this complex process and help unlock the economic value of your company while ensuring a smooth and orderly transition to a qualified buyer or investor that you select based on both your corporate and personal preferences.

In conclusion, working with the right team of advisors to manage a competitive sell-side process is the best approach to obtaining a premium price with a high probability of getting a deal done.  If you’d like to learn more details about the phases of the process, click here for a free ebook entitled “How Private Companies Are Valued And Sold”.


About Founders

Founders Investment Banking (Founders) is a merger, acquisition & strategic advisory firm serving middle-market companies. Founders’ focus is on oil and gas, industrials, software, internet, digital media and healthcare companies located nationwide, as well as companies based in the Southeast across a variety of industries. Founders’ skilled professionals, proven expertise and process-based solutions help companies access growth capital, make acquisitions, and/or prepare for and execute liquidity events to achieve specific financial goals. In order to assist Founders Investment Banking with securities related transactions certain Principals are registered investment banking agents of M&A Securities Group, Inc., member FINRA/SiPC. M&A Securities Group and Founders are not affiliated entities. For more information, visit www.foundersib.com.