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M&A Process

From Origination to M&A Execution

Once the investment banker has originated 8 to 10 multimillion dollar listings, one should transition from origination to M&A execution process creating a shortlist for each deal (10 in the shortlist). The investment banker should concurrently prepare the marketing package which includes the teaser and the executive summary. Once the teaser is finished, the investment banker should begin emailing the shortlist with the teaser. From this shortlist, a percentage will reply seeking additional information on the target. NDAs should be sent out and after being signed, the executive summary should be sent to the shortlist member. After the executive summary is sent, a percentage will decide to request a buyer/seller meeting. After the buyer/seller meeting, a percentage will decide to make an offer.


Building the Buyer Shortlist

The shortlist should include strategic and financial buyers and the investment banker should screen each that make it onto the shortlist for financial capacity to pay. The investment banker should use Salesgenie to pull the geographic competitors (geography screen with SIC code screen) and have 10 strategics. The investment banker should use the massinvestor database to determine which 10 financials to include in shortlist:



Competitors – synergies

Indirect Competitor



Hybrid strategic – financial buyer with asset in the sector

Pure financial


For deals that are $500k earnings and above, and should be used to find buyers. For deals below $500k in earnings, only should be used.


The Teaser

The teaser will contain an overall financial profile: three years of historical revenue and EBIT/EBITDA and at least two years of projected revenue and EBIT/EBITDA

Indicate type of transaction

Professional font (Times New Roman or Arial)

Send as PDF

Do not capitalize words or use flowery language

No grammar or spelling errors

Indicate sustainable growth potential based upon competitive advantage:

Customer entrenchment and high switching costs (ex. Software)

Long term contracts (ex. Equipment service companies)

Brand recognition (ex. Consumer products)

Intellectual property

Stable management teams




The NDA in a sell side engagement is a unilateral NDA meaning that only one side has to not disclose confidential information


Teaser With Name of Business & Financials

After the NDA is signed, a teaser with the business name is then sent to the buyer along with the financials in PDF form.



Executive summary

Company history

Sales process and/or manufacturing capabilities

Management team structure

Growth opportunities

Competitive landscape or industry outlook

Intellectual property overview and/or company assets

High-level financials (preferably five years of historical data and projections, if available)


The IOI (Indication of Interest)

Approximate price range. This can be expressed in a dollar value range (e.g., $10-15 million) or stated as a multiple of EBITDA (e.g., 3-5x EBITDA).

Buyer’s general availability of funds, including sources of financing

Necessary due diligence items and a rough estimate of the due diligence timeline

Potential proposed elements of the transaction structure, e.g., asset vs. equity, leveraged transaction, cash vs. equity, etc.

Management retention plan and role of the equity owner(s) post-transaction

Time frame to close the transaction


The Buyer/Selling Meeting

First conference call

In person meeting & tour the facilities

In person handshake meeting


The LOI (Letter of Intent)

Official deal structure and terms. Acceptance of engagement means that company cannot receive other offers


Deal Structure. Defines the transaction as a stock or asset purchase. Generally, the seller prefers a stock transaction from a tax and legal perspective. Asset transactions are preferred by the buyer to protect against prior liabilities and provides a stepped-up tax basis.


Consideration. Outlines the form(s) of payment — including cash, stock, seller notes, earn-outs, rollover equity, and contingent pricing.


Closing Date. The projected date for completing the transaction. This date is an estimation and often changes based on due diligence or the purchase agreement.


Closing Conditions. Lists the tasks, approvals, and consents that must be obtained prior to or on the Closing Date.


Exclusivity Period (Binding). It is common practice for a buyer to request an exclusive negotiating period to ensure the seller is not shopping their deal to a higher bidder while appearing to negotiate in good faith. Expect to see requested periods of 30 to 120 days. The duration may be negotiable, but the presence of the exclusivity term rarely is.


Break-up Fee (Binding). A fee to be paid to the buyer if the business owner decides to cancel the deal. Break-up fees are relatively common in larger deals (above $500 million). The fee can either be a percentage (typically 3%) or a fixed amount.


Management Compensation. Outlines plan for senior-management post-sale. This term describes who in the management will be provided employment, equity plans, and employment agreement. This term is often vaguely worded to provide the buyer with latitude since they may not be prepared to make commitments to senior management.


Due Diligence. Describes the buyer’s due diligence requirements, including time frame and access.


Confidentiality (Binding). Although both parties have probably signed a confidentiality agreement at this point, this additional term ensures all discussions regarding the transaction are confidential.


Approvals. Lists any approvals needed by the buyer (e.g., board of directors) or seller (e.g., regulatory agencies, customers) to complete the transaction.


Escrow. Provides the summary terms of the buyer’s expected escrow terms for holding back some percentage of the purchase price to cover future payments for past liabilities. The escrow is typically highly negotiable and often excluded from the LOI and presented for the first time in the purchase agreement.


Representations and Warranties. This clause will include indemnifications in the purchase agreement. It is best practice to include any terms that may be contentious or non-standard.


Due Diligence

Financial books and records

Incorporation documents

Employee benefits, policies and compliance issues

Internal systems and procedures

Customer contracts

Intellectual property

Condition of assets

Any key area of concern identified while negotiating the letter of intent


Digital deal rooms are now used (ex. Firmex and V-rooms). Due Diligence is usually 60 to 90 days


The Purchase Agreement

Incorporates all terms of the LOI and is written to address issues discovered in due diligence. The agreement will lay out a structure to handle this (a hold back account, deductions from future payments, price adjustment, etc.)


Pitchbook Table of Contents (exploring strategic alternatives to win a mandate):

  1. Executive summary
  2. Industry specific market update (discuss control premiums and multiples)
  • Review of company’s strategic priorities
  1. Potential strategic targets
    1. Vertical I
    2. Vertical II
    3. Vertical III


Sell side after winning the mandate:

  1. Discuss and demonstrate knowledge of buyer universe (strategic vs. financial)
  2. Discuss valuation range (“I believe that you can get $_____, providing that these things hold true”)
  • Process and timing
  1. Tax consequences
  2. What is going to happen to key management and employees


Confidential Information Memorandum (CIM) Table of Contents:

  1. Executive summary
  2. Key investment considerations
  • Growth opportunities
  1. Industry overview
  2. Company overview
    1. Overview
    2. Products and services
    3. Sales and marketing
    4. Operations
    5. Organization
  3. Financial overview


Confidentiality – Discuss in terms of project name, never mention name of company. “No comment” and refer press to PR department.


M&A Banker’s Role: M&A banker is hired to run a process:

  1. Defining exit options and strategies (4 types: auction process, controlled sale, targeted high level solicitation, closed negotiation)
  2. Valuation
  3. Recast financials
  4. Presentation and packaging
  5. Buyer qualifications
  6. Marketing
  7. Management coaching
  8. Due diligence facilitation (data room)
  9. Price and contract negotiation


From 100 buyer universe, narrow it down to 20 to 30 target buyers


Auction Process:

100-150 companies initial call

4 months; 6-12 months actual

Initial call interest, then send teaser

If interested after teaser, sign NDA, send CIM


Controlled Sale:

10-12 companies

4 months, 6-8 months actual


Targeted High Level Solicitation:

4-5 companies

2-4 months


Closed Negotiation:

1-2 parties

1-3 months


Regarding valuation, the investment banker will form the story which is either:

  1. Growth story
  2. Well operating story


Presentation and Packaging

CIM (1st round):

Week 1: interviews with CEO, CFO

2-3 weeks to create

70, 80, 90 pages


Teaser (1st round)

Management presentation (2nd round) – all info in CIM


Buyer Qualification:

Finalize to list of 50, bankers begin making phone calls



Sign NDAs, send CIM

Weekly calls with client to update (buyer list updates)



To win new business. Pitching can take years. This is ultimately deal sourcing with MDs calling on clients for 10-15 years.


Bake Off to Win Mandate:

To win sell side mandate there are 9 to 10 banks with 2 to 3 banks in the next round. They present to management and the board.


The Pitchbook to Win Business:

  1. Intros and quals
  2. Industry overview
  • Capital market overview (capital markets and products perspective (ex. M&A and IPO))
  1. Company and situation overview
  2. Valuation (football field)
  3. Process
  • Buyers/investors

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