ACQUISITION PROCESS

make a checklist

• • 1   Acquisition - what Kind of Acquisition are you interested in? (acquisition or Takeover, Consolidation, reverse takeover. reverse merger, the buyer is also going to want to pay with cash or Shares or both ). A Company might not be straight Forward bought out by another one. It could split into two companies as in a "demerger", "spin-off", then one company might not get sold but only Portion of it.
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  • 2    Legal structures - a Company is bought to Control or benefit from assets or for interests in the equity. In an asset purchase an entire Company is not bought but maybe a Division.  The process can be difficult to Isolate assets and liabilities pertaining only to that one asset, transference of licenses and Permits, transferring employees and utiliting the assets upon start up require skill and Talent. It is also important to scrutinize the buyer, will they want to compete for the same pool of customers?
• • 3
  Documentation
• • Letter of Intent
  • Due Dilligence
  • "merger agreement", "share purchase agreement" or "asset purchase agreement"
  • Regulatory approvals
  • Covenants
  • Restrict operations
  • Termination right upon breach
  • Required shareholder approvals
  • Indemnification provision
  • Post-closing, adjustments
• 4 Business valuation delivered with a Letter of Opinion of Value (LOV)
• • asset valuation,+
  • historical earnings valuation, +
  • future maintainable earnings valuation, + 
  • relative valuation (comparable company and comparable transactions) +
  • discounted cash flow (DCF) valuation
• 5 Financing
  • 5.1 Cash -  acquisitions rather than Mergers, pro-debt capacity in that it  may decrease the debt Rating and there are no major transaction costs.
  • 5.2 Stock - increases financial slack, may improve debt rating and reduce cost of debt and triggers  Need for preparation of a proxy statement, an extraordinary shareholder meeting and Registration.
  • 5.3 Financing Options - if the buyer buy with stock then the following:
  • • Stock (same effects and transaction costs as described above).
    • Shares in treasury: it increases financial slack (if they don’t have to be repurchased on the market), may improve debt rating and reduce cost of debt. Transaction costs include brokerage fees if shares are repurchased in the market otherwise there are no major costs.
• 6 Specialist advisory firms
• • full-service investment Banks - bulge bracket dealing with large and big deals
• • specialist M&A firms  - Acts as advisory to medium sized firms or SBEs
• • boutique investment Banks - highly focussed
• 7 Motivation
  • 7.1 Improving financial Performance 
  • 7.2 reducing risk
  • 7.3 Other - hedge a company against a downturn in an individual industry, the result of manager's overconfidence about expected synergies, Empire-Building and Need for power
• 8 Different types
  • 8.1 By functional roles in market
  • 8.2 By business Outcome - a Merger may take place so that assets are transferred and then a businesss dissolved, or both companies form to create a totally new one.
  • 8.3 Arm's length Mergers - no one cares, but everyone (directors & shareholders) approve
  • 8.4 Strategic Mergers -  Long term oriented and always looking for synergies to be had once bought
  • 8.5 Acqui-hire - buy a new team
  • 8.6 Merger of equals
• 9 Research and statistics for acquired organizations
• 10 Brand considerations
•            -    Keep one name and discontinue the other.

               -    Keep one name and demote the other

               -    Keep both names and use them together

                -   Discard both legacy names and adopt a totally new one