M&A – The Buy and Sell Process
Earnings season for publicly traded companies started in earnest last week. Some bank analysts made comments that investment banking should be a good contributor to bank earnings this year as M&A picks up with rates seeming to stabilize. If that’s the case, I thought it would be a good idea to revisit the M&A process.
Over the next several weeks, I will be discussing the high-level components of a typical Buy/Sell process from both the Seller’s and Purchaser’s perspective. If you or your firm focus on any of the steps below, please feel free to share your articles or blogs and I will try to include it on my weekly email. Below are the topics:
- Buy/Sell Plan – Whether you are looking to buy or sell, you should formulate a plan. If you are the buyer, identity why you are doing an acquisition and what the goals will be. If you are the Seller, see if your business is ready to be sold, list out likely acquirors and think through your post-sale plans.
- Valuation – If you are the buyer, get a good understanding of your spending parameters and what your business can handle. If you are the Seller, engaging a skilled business valuation expert can help you understand what the market is saying about your business.
- Negotiations/LOI – Once you have a sense of your spending ability or the value of your business, see if there is interest in the market. If there is interest and you find that Seller or Buyer, begin negotiations with a goal of getting to a signed Letter of Intent (“LOI”).
- Due Diligence – Once that LOI is signed, its time to get into the details. What are the key decision factors and hurdles that you want to learn about if you are the Buyer. If you are the Seller, can you provide that due diligence information and what can you commit to in a purchase agreement.
- Purchase/Sales Agreement – If due diligence goes as planned, the next step is executing the Purchase/Sales Agreement. This critical component formalizes the key terms agreed to in the LOI and provides the roadmap for the closing.
- Closing / Post Deal Commitments – The purchase/sale is finalized and the post-deal work begins. Trust me, this is where you truly find out how well you conducted all the pre-closing steps.
At the end of the day, think of the M&A process much in the same way you think about getting married. Successful deals, like marriages, are ones where there is true commitment from both sides. I think Warren Buffet said it best:
“As in the case with marriage, business acquisitions often deliver surprise after the ‘I do’s’”
Here are a few other things that may be of interest:
- Economic Review: Q1 2024 – Silvercrest (silvercrestgroup.com)
- ERTC Update: IRS Red Flags the Employee Retention Tax Credit (stambaughness.com)
- NFIB Webinar: Beneficial Ownership Reporting Is Here: What Small Business Owners Need to Know About the New Reporting Requirements (1/17; 12pm EST)
- Audit Insight 2024: Navigating GASB Updates & Federal Audits (eisneramper.com) (1/19; 11am-1pm)
- January 2024 Commentary: 2023 Market & Economy Review and 2024 Look Forward | Stonebridge Financial Group (stonebridgefg.com)
- Succession & Future Planning for Your Business – DAK (dakgroup.com)
As always, please don’t hesitate to email myself (email@example.com), Andy Miller (firstname.lastname@example.org), Christian Miller (email@example.com), Erik Spurlin (firstname.lastname@example.org), Brad Leber (email@example.com) or anyone in our office with questions or comments.