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Every M&A Deal has 9 Lives - ValleyBiggs

2015-07-09 0 Dailymotion

"This segment is about “saving the deal”. Every deal has hiccups and, as the saying goes, it’s like a cat with nine lives. The entire process can be, on very rare occasions, simple and fast or, much more usually, a time consuming, intricate endeavor that needs to be finessed from beginning to end. There are many moving parts and you want somebody on your team that has experience fixing problems. The question is whether there will be problems to fix before closing, but how many. <br /> <br />First, comes “The Offer”. Many Buyers like to lowball the offer. This can be a mistake. If the company is a good, solid company, it will sell for Fair Market Value. In most cases we can explain to a Buyer the importance of showing respect by starting with a reasonable offer. It is important as a Seller not to get offended by the offer if it comes in lower than expected. The object is to counter the offer and stay with the buyer until he brings the Buyer to a reasonable level and if he can’t achieve that then move on to the next prospect. It is not personal and shouldn’t be taken personally. <br /> <br />On the flip side, company shareholders should get overly enthused about a full price offer. Though it happens, it rarely ends up being as amazing as it sounds from the beginning. It is particularly common with Equity Groups. Private Equity oftentimes will come in with a full price offer, get the Seller vested with the time and energy of compiling the Due Diligence, and then find reasons to renegotiate the price and/or the payout structure to where they wanted it to be at the beginning. They also tend to offer more than Market Value, test the waters, stall the deal and then threaten to walk if they don’t get the price they designate. This can be frustrating, but once again, step back, don’t take it personally, look at the bigger picture and let the team at ValleyBiggs help with the negotiation process. That’s where we shine. We see right through these tactics and can put barriers in place to stop it from happening. It is similar to a game of chess. Employ logic and reason, not emotion. In the end, was your company capable of extracting a full offer price? Not likely. There is always a hedge built into the list price right from the beginning. There are also groups that look at a company and aren’t sure if they want to go forward so they will “tie the deal up”. These are the ones a good M&A consultant will spot and avoid. <br /> <br />Along the way there are many obstacles, all of which need to be smoothed out. Once the deal is signed, we then start the Due Diligence process. Make no mistake, if the Buyer uses his own accountant or financial advisor than no matter how solid the numbers are at the end of the process, the advisor will put a “caveat” in his final recommendation. He will warn the Buyer that the numbers aren’t exactly as represented, even in the best of scenarios they rarely are, and that the future risk is high and that based on this fact the deal is overpriced.

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