Going Through a Sale-Side Mergers and Acquisitions Process
Al Vanleuwen, Rod Steuart, and Jeremy Baker discussed the process of going through a Sale-side Mergers and Acquisitions process at the 2021 Intermountain CFO Summit.
In this session the panel members discussed the following topics regarding an M&A sell-side transaction:
- Preparing in advance for the transaction
- Bringing on outside help to prepare for a transaction
- What to expect during the transaction
- Considerations when selecting a buyer and what to expect post-transaction
Preparing for a sell-side M&A transaction
One of the steps AutoSource Motors took in order to prepare for a transaction was by getting a financial statement review. In addition, they had the goal to have two years of Audited financial statements prior to the sale of the business. Another step the business took was to have a third party prepare a Quality of Earnings report (Q of E). Autosource decided to get a Q of E report in preparation for the sale in order to help control the narrative around EBITDA and make sure the earnings were properly interpreted and understood by third parties.
Bringing on outside help for M&A deal closing process
In this video session, the panel discusses the value of bringing on outside help. The first step highlighted was the importance of bringing on an M&A attorney to assist with the transaction process. In addition, the panel discussed the importance of determining why the business intends to sell the company. Knowing if current shareholders want to go through a sales-side M&A process or sell to a closely held entity can help inform the decision of whether utilizing an investment banker makes sense. When choosing an investment banker those on the panel emphasized the importance of finding an investment banker who focuses on businesses within your company’s size and segment. Sometimes this might mean hiring someone in the market but it can also mean looking outside of the state, especially if you want to run a wider process. For example, AutoSource talked to local investment bankers and realized the expertise they were looking for wasn’t in SLC. For this reason, they ended up finding firms out of town and had them pitch to them. It was emphasized by the group that good investment bankers will ask questions that will “warp your mind” and that it is typically a good sign if your prospective banker asks questions that help you think about your business differently.
What to expect during the sales-side transaction process
During a sale-side transaction, it isn’t uncommon for a CFO to work a lot of extra hours. It is important to do as much advanced planning and organization as possible. In addition, it is important to utilize team members and outside professionals to help as needed so the process goes smoothly.
Considerations when selecting a buyer and what to expect post-transaction
There are many considerations that can help a business determine the correct course of action when selecting a buyer and understanding the owners’ and shareholders’ desires post transactions. Depending on the buyer the owners may be required to work for a period of time post-transaction. In addition, some opportunities may allow for a second bite of the apple and allow the current ownership to retain some equity within the deal. Strategic buyers may not want owners to be involved or want to bring on professional management teams to operate through the next phase of growth.
In summary, there are many considerations when going through a sale-side M&A process. For this reason, it is always important to surround yourself with good financial talent. A strong CFO can help a process go more smoothly and improve the outcomes for the shareholders and management team both pre and post-transaction. For more information about hiring a CFO or getting a Quality of Earnings report please visit our website or fill out a contact us form.