Table Of Content®
Mergers & Acquisitions For Dummies
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Table of Contents
Introduction
About This Book
Conventions Used in This Book
What You’re Not to Read
Foolish Assumptions
How This Book Is Organized
Part I: Mergers & Acquisitions 101
Part II: Taking the First Steps to Buy or Sell a Company
Part III: Starting the Deal on the Right Foot
Part IV: Firming Up the Deal
Part V: Closing the Deal . . . and Beyond!
Part VI: The Part of Tens
Icons Used in This Book
Where to Go from Here
Part I: Mergers & Acquisitions 101
Chapter 1: The Building Blocks of Mergers and Acquisitions
Defining Mergers and Acquisitions
Introducing Important Terms and Phrases
Buyer
Seller
Transaction (also known as the deal)
Consideration
EBITDA
Adjusted EBITDA
Closing
Adhering to Basic M&A Rules and Decorum
Follow the steps to getting a deal done
Understand M&A etiquette
Know what to tell employees — and when
Considering the Costs Associated with M&A
Tallying advisors’ fees and other costs
Paying off debt
Post-closing adjustments
Sigh . . . talking taxes
Determining What Kind of Company You Have
Sole proprietorship
Small business
Middle market and lower middle market company
Large company (and beyond)
Chapter 2: Get ting Ready to Buy or Sell a Company
Considering Common Reasons to Sell
Retirement
Let someone else take the company to the next level
Divesting a division or product line
The industry is changing
I’ve got troubles, troubles, troubles
Selling a piece of the company
Planning Ahead to Ensure a Smooth Sale
Clean up the balance sheet
Pay off debt
Address legal issues
Trim staff and cut dead weight
Increase sales
Quantify owner’s expenses and other add backs
Owner, make thyself expendable
Exploring Typical Reasons to Acquire
Make more money
Gain access to new products and new markets
Implement vertical integration
Take advantage of economies of scale
Buy out a competitor
Prepping before an Acquisition
Determine the appropriate type of acquisition
Get your company’s balance sheet in order
Have the money lined up
Set up an acquisition chain of command
Buying a Company from a PE Firm
Understanding why PE firms sell
Evaluating a PE firm’s portfolio company
Chapter 3: Previewing the Generally Accepted M&A Process
Take Note! The M&A Process in a Nutshell
Step 1: Compile a target list
Step 2: Make contact with the targets
Step 3: Send or receive a teaser or executive
summary
Step 4: Execute a confidentiality agreement
Step 5: Send or review the confidential information
memorandum
Step 6: Solicit or submit an indication of interest
Step 7: Conduct management meetings
Step 8: Write or review the letter of intent
Step 9: Perform due diligence
Step 10: Draft the purchase agreement
Step 11: Show up for closing
Step 12: Deal with post-closing adjustments and
integration
Exploring Two Types of M&A Processes: Auction versus
Negotiation
Who Has It Easier, Buyer or Seller?
Selling is easy if you know what you’re doing
Buying is difficult even if you know what you’re
doing
Following the Power Shifts in the M&A Process
Looking at the factors of motivation
Understanding who has power
Reading the other party’s situation
Maintaining as much power as possible when
disclosing undesirable news
What to Tell Employees and When
Keep news of a sale process confidential
Never lie
A staggered release
Part II: Taking the First Steps to Buy or Sell a Company
Chapter 4: Financing M&A Deals
Exploring Financing Options
Buyer uses his own cash
Buyer borrows money
Buyer utilizes Other People’s Money
Buyer seeks financial help from the Seller
Understanding the Levels of Debt
Surveying senior lenders and subordinated debt
Looking at lines of credit
Taking a Closer Look at Investors
Institutions versus individuals
Private equity (PE) firm
Strategic Buyer
Striking the Right Type of Deal
Exploring the differences among buyouts and
majority and minority investments
Choosing an asset or a stock deal: What’s Buyer
buying?
Examining the All-Important EBITDA
Making Buyers’ Return Calculations
Return on equity
Return on investment
Internal rate of return
Financing a Problem Child
Debt is greater than purchase price
The business has operating losses
Chapter 5: With a Little Help from Your Friends: Working with
M&A Advisors
Choosing Wisely: Identifying Ideal Advisors
Utilizing Inside Advisors
CFO or other financial bigwig
Corporate development people
Hiring Outside Advisors
Consulting wealth advisors when you’re ready to sell
Considering an intermediary
Lawyering up on both sides
Looking at accountants and auditors for Buyers and
Sellers
I’m the tax man!
Recruiting more consultants to Buyer’s team
Seeking friendly advice: Using friends and family as
informal advisors
Skipping business appraisers
Keeping Everyone on the Same Page: Avoiding
Communication Breakdowns
Getting Your Banker Involved
Chapter 6: Finding and Contacting Buyers or Sellers
Creating a Target List
Getting started
Expanding and winnowing the list
Capping the list: How many (and which) companies
to include
Sellers on Your Mark: Contacting Buyers
Speaking with the right person
Following a script that works
Easy Does It: Contacting Sellers
Getting the call off on the right foot
Using a successful script
You’re having a serious conversation! What now?
Additional Tips for Getting Past Screeners
Recognizing who you’re dealing with
Overcoming screener roadblocks
Tracking Your Calls
Part III: Starting the Deal on the Right Foot
Chapter 7: Assuring Confidentiality
Tempting Buyers with an Anonymous Teaser
Keeping it short and sweet
Including high-level financial info only
Touting key selling points
Executing a Confidentiality Agreement
Perusing the CA’s contents
Figuring out which party sends the CA
Determining who gets more value out of the CA
Handling a Breach of Confidentiality
Confirming a breach
Thinking long and hard about legal action
Keeping the Cat in the Bag: Advice for Buyers
Involving employees and advisors
Discussing the deal in public
Chapter 8: Creating and Reviewing an Offering Document
The Offering Document in a Nutshell
Compiling the Executive Summary
The thesis
Seller’s rationale for seeking a deal
Seller’s deal guidance
Presenting the Company’s Background
The company’s past and present
Ownership and legal entity
Employee info and benefits
Locations of offices and facilities
Real estate
Technology
Description:The easy way to make smart business transactions Are you a business owner or executive thinking about selling a division, a subsidiary, or the entire company? Or are you thinking about how you may be able to grow your business by merging with or acquiring other companies? Or are you a student t
