Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisitions

CHAPTER 6

M&A Sale Process

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, 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 relatively 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 buyers, is designed to maximize competitive dynamics and heighten ...