Investment Banking, 3rd Edition

CHAPTER 6Sell-Side M&A

The sale of a company, division, business, or collection of assets (“target”) is a major event for its owners (shareholders), management, employees, and other stakeholders. It is an intense, time-consuming process with high stakes, usually spanning several months. Consequently, the seller typically hires an investment bank and its team of trained professionals (“sell-side advisor”) to ensure that key objectives are met and a favorable result is achieved. In many cases, a seller turns to its bankers for a comprehensive financial analysis of the various strategic alternatives available to the target. These include a sale of all or part of the business, a recapitalization, an initial public offering, a spin-off of part of the business into a standalone company, or a continuation of the status quo.

Once the decision to sell has been made, the sell-side advisor seeks to achieve the optimal mix of value maximization, speed of execution, and certainty of completion among other deal-specific considerations for the selling party. Accordingly, it is the sell-side advisor’s responsibility to identify the seller’s priorities from the onset and craft a tailored sale process. If the seller is largely indifferent toward confidentiality, timing, and potential business disruption, the advisor may consider running a broad auction, reaching out to as many potential interested parties as reasonably possible. This process, which is relatively neutral toward prospective ...