By Scott J. Storey

The-M-and-A-Sales-Process-2Business owners contemplating a sale of their company are often tempted to handle their own transaction and question why they should engage a trusted advisor to manage the deal. My answer to this question is a simple message: process drives value.

Gaining Value

BB&T Capital Markets recently represented a business owner who was approached by a single potential acquirer offering $40 million for his company. The owner thought the figure was sufficient to seriously consider a sale and asked us to represent him. During the process, our team contacted more than 100 possible buyers before narrowing the field down to three offers and eventually closing the transaction for $46 million. The process increased the purchase price by 15 percent, but more interestingly, the company sold to the same buyer who put forth the original bid. In this case, as in so many others, an acquirer was searching for a value buy in a noncompetitive situation. By running a rigorous M&A process, we were able to uncover the true company value and ensure that the best buyer was identified.

The M&A Process

You may be wondering what the M&A process involves. Simply stated, we start with a large number of interested potential acquirers and aggressively push the parties on a number of factors, including price, terms and fit, to systematically whittle down the groups to one final buyer. An effectively managed engagement typically takes six months and can be divided into three phases: preparation (1.5 months), marketing (2.5 months) and closing (2 months).

In the preparation phase, the capital markets advisor conducts due diligence on the business and prepares the materials that will be used in the marketing phase. Once these materials are ready, the marketing phase begins and the advisor reaches out to an agreed upon group of potential acquirers and gauges their interest in the opportunity. During these initial conversations the advisor tells the company’s story and paints a picture to investors of the potential of the business and the industry.

Following these discussions, interested parties submit a valuation range for the business and afterwards a handful of potential buyers are invited to meet the company’s management team. After face-to-face meetings between the management team and investors, potential acquirers submit their final offer for the business. From those proposals, the client selects a buyer. At every step of the way, the capital markets advisor is using the idea of competition to push potential buyers on valuation, terms and timing to ensure each is maximized. The right capital markets advisor is critical in assisting in the selection of the buyer by providing the client with valuable insight about a specific buyer’s behaviors during and after a transaction. Finally, once a buyer is chosen, the process moves to the closing phase, when the acquirer performs confirmatory diligence and the attorneys draft the purchase agreement.

As you consider your options, remember a well-managed M&A process allows the seller to reach an appropriately broad audience of buyers to create a competitive dynamic that will improve valuation and deal terms while controlling the timeline. The M&A advisor’s ultimate goal is to present clients with a variety of options so they can choose the optimal mix of valuation, deal structure and cultural fit to meet their objectives.

If you are interested in learning more about the M&A process, ask your Wealth advisor about BB&T Capital Markets, the full service investment banking division of BB&T and a leading middle market M&A advisor.

By Scott J. Storey

The-M-and-A-Sales-Process-2

Business owners contemplating a sale of their company are often tempted to handle their own transaction and question why they should engage a trusted advisor to manage the deal. My answer to this question is a simple message: process drives value.

Gaining Value

BB&T Capital Markets recently represented a business owner who was approached by a single potential acquirer offering $40 million for his company. The owner thought the figure was sufficient to seriously consider a sale and asked us to represent him. During the process, our team contacted more than 100 possible buyers before narrowing the field down to three offers and eventually closing the transaction for $46 million. The process increased the purchase price by 15 percent, but more interestingly, the company sold to the same buyer who put forth the original bid. In this case, as in so many others, an acquirer was searching for a value buy in a noncompetitive situation. By running a rigorous M&A process, we were able to uncover the true company value and ensure that the best buyer was identified.

The M&A Process

You may be wondering what the M&A process involves. Simply stated, we start with a large number of interested potential acquirers and aggressively push the parties on a number of factors, including price, terms and fit, to systematically whittle down the groups to one final buyer. An effectively managed engagement typically takes six months and can be divided into three phases: preparation (1.5 months), marketing (2.5 months) and closing (2 months).

In the preparation phase, the capital markets advisor conducts due diligence on the business and prepares the materials that will be used in the marketing phase. Once these materials are ready, the marketing phase begins and the advisor reaches out to an agreed upon group of potential acquirers and gauges their interest in the opportunity. During these initial conversations the advisor tells the company’s story and paints a picture to investors of the potential of the business and the industry.

Following these discussions, interested parties submit a valuation range for the business and afterwards a handful of potential buyers are invited to meet the company’s management team. After face-to-face meetings between the management team and investors, potential acquirers submit their final offer for the business. From those proposals, the client selects a buyer. At every step of the way, the capital markets advisor is using the idea of competition to push potential buyers on valuation, terms and timing to ensure each is maximized. The right capital markets advisor is critical in assisting in the selection of the buyer by providing the client with valuable insight about a specific buyer’s behaviors during and after a transaction. Finally, once a buyer is chosen, the process moves to the closing phase, when the acquirer performs confirmatory diligence and the attorneys draft the purchase agreement.

As you consider your options, remember a well-managed M&A process allows the seller to reach an appropriately broad audience of buyers to create a competitive dynamic that will improve valuation and deal terms while controlling the timeline. The M&A advisor’s ultimate goal is to present clients with a variety of options so they can choose the optimal mix of valuation, deal structure and cultural fit to meet their objectives.

If you are interested in learning more about the M&A process, ask your Wealth advisor about BB&T Capital Markets, the full service investment banking division of BB&T and a leading middle market M&A advisor.

 

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About the Author

Scott J. Storey

Scott J. Storey

Senior Vice President, Investment Banking Group, BB&T Capital Markets

Scott has extensive experience advising companies in M&A, capital raising, operational, restructuring, and global capacities. His career focus is in investment banking, mergers and acquisitions and equity and debt capital raise transactions for middle market companies. Scott received a B.S. from the University of Virginia and an M.B.A. from the University of North Carolina at Chapel Hill.