The Handbook of Financing Growth: Strategies, Capital Structure, and M&A Transactions, Second Edition

CHAPTER 3

Acquisitions, Recapitalizations, and Exits

Mergers and acquisitions (M&A) transactions can be a viable alternative for accomplishing a number of strategic objectives in the context of building and realizing value for emerging growth and middle-market companies. This chapter is intended to provide an overview of the buy-side and sell-side processes, and a framework for thinking about and planning execution of these initiatives with a focus on financing the deal.

ACQUISITIONS

Acquisitions can meet a number of goals if approached and executed as part of a long-term strategy. Some of the typical reasons executives pursue acquisitions include:

• To accelerate revenue growth.

• To expand into a new geography or obtain a physical footprint in a new location.

• To access a new market or new customers.

• To access technology.

• To strengthen the pool of talent and capabilities.

• To fill in a product or service line.

• To reduce costs.

• To capture market share.

• To prevent a competitor from gaining these advantages.

Figure 3.1 provides an overview of the acquisition process. The first phase addresses finding a target company to buy; this process begins with the strategic plan, which lays the foundation to determine many of the parameters and the focus of the process. Take note that this process is really a condensed restatement of our basic financing process presented in Figure 1.1, highlighting a specific strategic initiative (the acquisition). The second phase of the process is ...