www.corporatefinanceassociates.com The M&A Process and It’s Alligators Corporate Finance Associates The M&A Process and It’s Alligators Page 2 The M&A Process and It’s Alligators Introduction This paper will describe the Merger and Acquisition (M&A) process for small to medium sized companies. It will discuss the process from the view of both the “buyer” and the “seller”, based on our experience that each “side” in this process should not only understand what they need to do, but should understand what the other players in the process are doing at the same time. It is also important that each participant in the process clearly understand the goals and objectives of the other parties as well as their own. A mutual knowledge of the process, clear communications and a mutual respect will accomplish much toward completing a successful merger or acquisition. To simplify the description of the process, we will break it into four major sections, which usually, but not necessarily follow each other in time. Figure 1 (below) describes the flow, and potential points of backtracking. It is also important to bear in mind that a buyer and seller do not need to be at the same stage in this process when they first enter into communication. Sellers and buyers may identify and approach target companies which are not actively pursuing the possibility of acquiring or being acquired. This difference in planning maturity means that the initiating party will occasionally have to show patience, and wait for the party to “catch up” in the process. Strategic Planning and Organization When a company first seriously considers M&A activity, whether as a buyer or a seller, they should put together an M&A team, which may grow as the transaction progresses. They need to identify team members, including a senior executive with time to devote to the process, Buyers Both Sellers wAssemble M&A Team wDefine Strategic Objectives wDefine Acquisition Strategy wDefine Selling Strategy wDefine Acquisition Criteria wDefine Buyer Criteria wPrepare Selling Memo Planning & Positioning Target Identification Target Approach Negotiation Figure 1 Corporate Finance Associates The M&A Process and It’s Alligators Page 3 assign responsibilities, and educate the team on their responsibilities if needed. This team will be a combination of internal staff and external team members. Some companies are able to develop and retain an internal M&A staff, but this is not the case for many companies. For sellers especially, this may be a one time transaction, and external consultants can help anticipate issues which may be the difference between a successful and an unsuccessful transaction. Companies need to determine their strategic objectives very early, as they form the foundation for all that follows. For buyers, M&A is nearly always a strategic, as opposed to a financial, decision. They typically desire to strengthen their competitive position by acquiring products, technology, distribution or in-place customers. Sellers may desire to exit their company for financial purposes, or they may determine that they cannot continue on a desired strategic path without combining resources with an acquirer. These strategic objectives lead directly to the next planning step. A potential buyer should develop acquisition criteria which define what kind of target company will help them meet their strategic goals. At this point they should develop a general acquisition strategy - that is a general idea of the terms they desire for any acquisition. This includes deciding if their stock will be used as part of the purchase price, and if external funding from banks or other investors will be needed. A decision should be made regarding the general size of the desired acquisition, to match available resources. Similarly, a seller should define the characteristics of a desirable buyer, and develop a selling plan to guide them in approaching potential buyers. For larger companies which are publicly traded,

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