The document provides an overview of mergers and acquisitions for private companies. It discusses common reasons why companies sell, factors to consider when deciding whether to buy another company, important questions to ask before an acquisition, the typical M&A process, negotiation strategies, resolving valuation differences, types of due diligence, common deal structures, important shareholder agreement clauses, post-merger integration, and reminders for M&A transactions.

1. Mergers and Acquisitions
for Private Companies
An introduction by:

2. What will be covered

Why do sellers sell? 
Accounting due

Should you buy? diligence

More questions to ask

Legal due diligence
before buying 
Types of deals

The Mergers and 
Post-merger
Acquisitions process integration

Basic negotiation 
Some important
strategies reminders

Resolving valuation
differences

3. Why do sellers sell?

Retirement 
Sale of part of

Need additional company to fund
expertise to take growth
company to the next 
Accessing
level accumulated wealth

Divesting a division or 
Buying out a partner
product line 
Paying off debts

Industry changes

Operational troubles

4. Why is it important to know why
sellers sell?
1. Knowing common reasons why sellers sell may
indicate whether a particular company is a potential
target for acquisition.
2. Seller's motivation to sell affects the potential sale
price.
3. Knowing seller's motivation may also highlight
potential issues post-merger and acquisition.
Query: As you think about your suppliers and
competitors, would any of them be motivated to sell
based on any of the common reasons for sale?

5. Should you buy?

Strengthen market 
Eliminate competition
position 
Enhance offering

Turnaround to make 
IPO
money

Access to customer

Complementary for base
cross-selling

New capabilities and

Geographic technologies
expansion

Business

Economies of scale transformation

6. Points to ponder:
Have you previously acquired a company? In
hindsight, was it for a good reason? Why or why
not?
If you were considering to acquire a company
presently, what would be your reason for doing
so?

7. More questions to ask before buying
The previous reasons relate to corporate/business
unit strategies. In addition to those reasons, you
need to consider:
a. Is the target company the best candidate?
b. Can the deal be made at the right price?
c. Is it the best way to structure? (in terms of
shares, assets, contracts, etc)

8. The mergers and acquisitions
process

The M&A Process 
c.f. Human Relations

Targeting 
Flirting

Mutual non-disclosure 
Dating

Negotiation 
Courting

Valuation 
Proposing

Term sheet/ LOI 
Engagement

Due diligence 
Trial period?

Agreement 
Marriage

Integration 
Staying married

9. Basic negotiation strategies

Know your position relative to the 
Always leave room for yourself and
other the other side to step down without
losing face. Don't issue

Assess your Best Alternative to a unnecessary ultimatums unless
Negotiated Agreement (“BATNA”) you are ready to stand by it.
and that of the other side

Be aware of silent needs, interests

Assess your Worst Alternative to a and wants, of the decision-makers,
Negotiated Agreement (“WATNA”) as well as their influencers and
and that of the other side professional advisers.

Only deal with decision makers- 
Be comfortable with long periods of
check for their mandate silence.

Use “if...then”
“If I concede to your request, then
would you in turn...”

Practice active listening. Listen for
the unspoken messages.

10. Resolving valuation differences
between seller and buyer

Make payments over 
Use share swaps instead
time instead of of cash
immediately. 
Retain the seller as a

Agree to earn-outs for consultant
seller (i.e. seller gets 
Provide a bonus for the
value he wants based on
seller to remain in the
future revenues, profits,
company
etc)

Agree to value on a
future year

Undertake a partial buy-
out

11. Be aware that there are at least 2
types of due diligence
Accounting due diligence
Legal due diligence

12. Accounting due diligence

Financial/accounting info 
Material commitments to key
(whether made on same staff, suppliers and
basis/principles? Statutory filings customers
done? Bank signatories and
safeguards?) 
Valuation of properties and

Debts equipment

Statutory contributions and

Insurances
tax compliance (EPF, SOCSO, 
Transfer pricing issues
PCB, corporate taxes, customs
and excise- laws may render
directors liable for company
liabilities, so important to make
sure in order)

13. Legal due diligence

NDAs 
Compliance to laws and legal
obligations (tax, environment,

Corporate info (capitalisation, employment, conditions of
shareholding, directorship, contracts and titles)
authorisation, good standing,
structure, subsidiaries, affiliates) 
Intellectual property
(ownership, registration)

Contracts and MOUs
(employees, suppliers, customers, 
Pending litigation, claims and
creditors, banks, share options, contingent liabilities
powers of attorney)

Insurances (validity and

Inventory (ownership, risks) subsistence, inventory, real estate,

Real estate, machinery and machine and equipment, all risks,
others)
equipment (ownership,
encumbrances) 
Regulatory requirements for
operations (licences and permits,
subsisting breaches, renewals and
conditions)

14. Common types of deals
1. Sale and Purchase Agreement – purchaser shares of target company
2. Asset Purchase Agreement – purchase assets of target company, not
shares. Liabilities not assumed.
3. Joint Venture Agreement – acquire business of target company but not
company itself nor its assets
4. Non-compete Agreement – restrain selling owners from competing with
new owners. Purchase of business with goodwill is one of three statutory
exceptions allowing a non-compete under the Contracts Act 1950
5. Non-Disclosure Agreement – prohibition against disclosure of terms of
deal
6. Employment/Service or Consulting Agreement – engage selling
owner for purposes of integration, technology transfer, extension of non-
compete or future earn-outs

15. Important clauses for shareholder
agreements

Role of each shareholder 
Decision making process- by
majority, super-majority or

Representation on the board,
require consensus for certain
chairmanship and casting
decisions?
vote

Right of first refusal for

Management rights
shares

Access to documents and 
Ways for shareholders to exit
accounts

Valuation of shares upon

Control of bank signatory
intended exit

Control of rights issues (can 
Call and put options- may be
be used to dilute minority
used as dispute resolution
shareholders)
process

Dividend policy

16. Post-merger integration

Have an integration 
External
plan in place communications
(integration of 
Finance systems
systems and integration
employees)

IT integration

Ensure all
announcements are
managed

Training plan

Customer visits

17. Some important reminders

Term Sheet/ LOI is only the 
Do not lose sight of who is
start of the process. Deals the decision maker of the
are not done even with the other side, and what is
Term Sheet/LOI signed. his/her motivation

Be prepared with your 
Do not withold material
documents for due diligence information- there may be
process. legal repercussions

Do not just demand. Justify 
Do not announce the deal
the valuation you want. before it is really done

If there are problems in your 
Do not call employees,
financial statements, admit customers or suppliers of the
them. They would be seller without prior
discovered anyway. permission

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and business owners, focused on:
1. Litigation and arbitration;
2. Real estate transactions and financing;
3. Construction disputes;
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