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White Paper                             PART 1 OF 3Executing Effective M&A:Critical Considerations fromPre- to Post-Deal C...
Contents                                                                               PART 1 OF 3      Executive Summary ...
Executing Effective M&A: Critical Considerations                   Executive Summary                                Execut...
Even during periods of uncertainty, however, companies who want to grow still seek                               new produ...
Executing Effective M&A: Critical Considerations                              From a seller’s perspective, preparing for d...
control of who sees what information by virtue of the ability to grant varying rights to                              diff...
About Merrill DataSite                              Merrill DataSite is a secure virtual data room (VDR) solution that opt...
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Executing effective m&a, part 1 – pre deal phase


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(a free paper by Merrill)

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Executing effective m&a, part 1 – pre deal phase

  1. 1. White Paper PART 1 OF 3Executing Effective M&A:Critical Considerations fromPre- to Post-Deal Closure M E R R I L L D A T A S I T E
  2. 2. Contents PART 1 OF 3 Executive Summary 3 Creating an M&A masterpiece 3 What time is the right time for M&A? 3 Preparing for success: Going to market and preparing for due diligence 4 How a virtual data room (VDR) enhances pre-deal preparation 5 Next time… 6
  3. 3. Executing Effective M&A: Critical Considerations Executive Summary Executive Summary In the world of mergers and acquisitions, executing a smartly conceived, well-timed plan is everything. To be successful, M&A activity must have clearly defined goals that are communicated repeatedly to all team members, and the deal must follow a structure that allows those goals to be accomplished in a methodical way. Most importantly, M&A transactions that succeed in creating enhanced value always follow certain steps before, during and after the deal itself. In Part 1 of this 3-part series on Executing Effective M&A, we will examine the critical pre- negotiation preparations that must take place to properly position a deal for success and ensure value creation after the deal is done. Creating an M&A Masterpiece Industry experts in the M&A world sometimes refer to “the art of the deal.” It’s a phrase that encompasses the hard-to-characterise actions that separate a successful venture from one that’s doomed to failure, and it includes the experience, insight and knowledge displayed by the deal team in order to ensure that a transaction ultimately creates the value that was intended. But, bend this metaphor into a slightly different shape and you see that the “art” of a deal might only be a rigorous process, impeccably implemented. Imagine an M&A transaction is an actual piece of art, perhaps an oil painting by aWith M&A, each step in master craftsman. The painting process is broken down into a series of discrete stepsthe process—from long before the masterpiece is achieved. The artist first must select a compelling subject,before the deal begins assemble the right paints, solvents and brushes, create and refine the initial sketches,until after it’s concluded— and then continually rework the final image until the piece is finished and its worthmust occur with the proper can be assessed in the marketplace.subject, in the proper Similarly with M&A, each step in the process — from long before the deal begins untilplace, at the proper time, after it’s concluded — must occur with the proper subject, in the proper place, at theusing the proper tools. proper time, using the proper tools. Companies must painstakingly select the correct potential target from among all the possibilities available to them; they must assemble the people to pursue the project, they must conduct rigorous due diligence to fully understand the deal, and once it’s done and the two new entities have been integrated, only then will management understand how the market values their creation. Both acquirers and sellers can benefit from examining their deal-making in light of this progression from beginning to middle to end. Following each stage methodically, as well as industry best practices, can ensure that a deal is ultimately successful on all levels. We will start by examining how the M&A process can be positioned for success even before the deal begins. (In Parts 2 and 3 of this series, we will look at best practices during deal due diligence, and also best practices for post-merger integration.) What time is the right time for M&A? M&A activity occurs whenever a company or group decides to pursue changes that will result in a greater monetary value being created than previously existed. Today, however, a number of factors are combining to make the M&A process more fractured, more complicated and lengthier than ever before as would-be buyers exercise extreme levels of caution for fear of making a poor buying decision during turbulent times. 3
  4. 4. Even during periods of uncertainty, however, companies who want to grow still seek new product lines, new markets and new geographic inroads. Organisations that wish to sell an asset want to realise the value they’ve achieved with that product or they want to move in a new direction when that asset is no longer necessary to the strategic corporate direction. In either case, both buyers and sellers could benefit tremendously by positioning themselves for M&A efforts long before they sit down with a prospective partner. In fact, preparation for M&A should begin as much as 18 months prior to an actual deal, particularly in light of today’s market where buyers are weary of economic turmoil, political uncertainty and increasingly litigious and regulated conditions. In some sophisticated companies with extensive experience in M&A, such as private equity (PE) firms who manage a large number of portfolio companies, internal company documentation may be assembled and prepared a year or more prior to a potential sale. The reason? PE management know exactly what type of documentation and information potential acquirers will be looking for and the format in which they will be most easily able to review it. Starting preparations early allows them to precisely tailor that information to match the requirements of due diligence. In addition, by beginning to prepare and collect all M&A information well in advance of a sale, everyone on the PE deal team has time to carefully examine and digest that information. They can take the time to identify potential gaps or areas where more documentation is needed. They can do a “dry run” due diligence on their own data, testing that their information systems and financial data are both solid and that their internal processes stand up to scrutiny. They can also anticipate the types of red flags that a purchaser might find alarming and then work to reduce those issues and ensure full disclosure in order to increase a buyer’s confidence levels. These sophisticated players in the M&A world understand that a good process that contributes to faster, easier due diligence results in a better M&A experiencePreparation for M&A for everyone involved.should begin as much as18 months prior to an Unlike other companies who have little to no experience with M&A, PE firmsactual deal, particularly in understand this before-deal preparation will eventually allow them to sell their portfoliolight of today’s market companies to the right buyer, at the right price, in an expedited fashion.where buyers are weary ofeconomic turmoil, Preparing for success: Going to market and preparing for due diligencepolitical uncertainty and It’s a truth that shows up repeatedly throughout the M&A world: Deals that drag on andincreasingly litigious on often have an unsatisfactory outcome. A key reason that deals get bogged down in dueand regulated conditions. diligence is that often a company has not properly prepared for the process. Due diligence processes that tend to falter are ones where the target company really didn’t understand what types — and how much — information a thorough due diligence review would demand. In that case, would-be purchasers must continually request more and more information to complete their diligence, which both slows down the deal and gives the impression that the target company is lax and unprofessional. In an unprepared company, documents have to either be gathered ad hoc, or in worst-case scenarios, even created ad hoc because they don’t exist in a usable format. That puts incredible strain on internal resources within the company, and hurrying to supply documents in response to specific requests can lead to mistakes and other errors that will potentially kill a deal.4
  5. 5. Executing Effective M&A: Critical Considerations From a seller’s perspective, preparing for due diligence involves assessing how an asset can be best packaged for sale. Especially in the type of buyer’s market that seems to exist now throughout the world, company management must decide early on how their asset might best be restructured, fine-tuned and ultimately financed. By starting the process early, in advance of actual negotiations, the owners of an asset have the opportunity to present it in the best light. They can proactively address any possibleA VDR keeps everyone red flags that might trip a potential buyer, such as regulatory, compliance or even politicalfocused inside one concerns for the market in which they operate. This is particularly true for companies thathomogeneous platform to operate in certain emerging markets where the potential for corruption has been wellaccomplish the document reported, or in markets where increasing government oversight and regulation of issues,collection. It expedites such as bribery, are on the rise.information gathering by In addition, the faster an asset can be prepared for due diligence, the more ability a sellerallowing for collection and has to quickly react to fluctuations in the market. If a would-be seller maintains a state ofverification of exactly asset-readiness by beginning document collection well before an expected deal, it becomeswhat’s needed, including possible to quickly pull the trigger when market windows open.the right version of anyparticular document. Pre-deal preparation is also important for prospective acquirers today. For companies considering an acquisition, it’s critical for those involved to painstakingly identify and then communicate what they want to accomplish with an acquisition: Is it to extend the corporate footprint, to bolt-on an opportunity, to gain a geographic foothold in a certain region or even to take out a competitor? Aligning the due diligence team with the corporate goals from the outset is essential. Taking the time internally to focus the acquisition team and key internal contacts on the merits of an acquisition ultimately lays the groundwork for a gratifying deal conclusion. How a virtual data room (VDR) enhances pre-deal preparation A good document process and a good system that fosters thorough reporting on critical subjects, such as financials, legal and regulatory compliance efforts, anti-bribery provisions, intellectual property concerns and human resources issues will go a long way to actually executing a deal. As such, a virtual data room (VDR) can be the critical tool that allows dealmakers to present all relevant information in a secure, centralised, Internet-accessible and easy-to-use format. Another benefit of employing a VDR before you go to market is that it easily allows you to coordinate a geographically dispersed team without expensive and time-consuming travel. A VDR greatly simplifies coordinating pre-deal activities with expert advisors, wherever they are located, including bankers and legal/accounting/HR experts. Everyone can gather and post information to a single, secure platform, and then use that platform for all pre-deal reviews. By using VDR technology to benefit the deal team, worries over e-mails that could potentially be leaked, or the problem of attachments that are too large to transmit easily are removed. And, because the VDR serves as a central repository, it’s much easier to keep multiple people from duplicating effort. A VDR keeps everyone focused inside one homogeneous platform to accomplish the document collection. It expedites information gathering by allowing for collection and verification of exactly what’s needed, including the right version of any particular document. Using a top-line VDR also means that potential partners from anywhere around the world can easily log in to the VDR to conduct early, “first look” due diligence. If a VDR with industry-leading security features is employed, dealmakers can remain in complete 5
  6. 6. control of who sees what information by virtue of the ability to grant varying rights to different users. There are no limits in terms of potential targets or potential acquirers. A company in China could sell itself to a company in Ohio, and vice versa. A potential acquirer can log in to the VDR from their desk and examine a potential acquisition anywhere in the world. This is clearly another benefit to employing a VDR: by making it exceptionally easy for potential partners to review a deal, the potential buying audience for an asset is greatly expanded. In addition, by using the specialised tools built into the highest-quality VDRs, onceBy making it exceptionally potential partners are invited to review the deal, an effective audit trail is established,easy for potential partners along with excellent insight into a potential partner’s motivations. The VDR “owner” canto review a deal, the see exactly what information different groups are viewing, down to the exact amount ofpotential buying audience time they have spent on a particular page. This provides critical insight into what a buyerfor an asset is greatly might have concerns about, and allows time for a proactive response.expanded. From the buyers’ standpoint, using a VDR as a due diligence vehicle means they will see a well-organised, searchable repository of documents provides a favourable impression of the asset, and the company selling it. Finally, if the correct VDR from a 3rd party vendor is selected, advantage can be gained from their extensive industry expertise, including pre-built indexes designed specifically to help post the right types of information for more than 250 specific industries, such as mining or technology or pharmaceutical sales, or for specific deal types, such as distressed asset sales or bankruptcy actions. Selecting the right VDR partner can also provide access to their expert consultants who can help design a best-practice workflow among team members to enable the end goal to be achieved more quickly. Next time… In Part 2 of Executing Effective M&A, we will examine best practices for due diligence during the deal, and in Part 3, we will look at how you can employ specific tools to improve post-deal integration. To learn more about how Merrill DataSite can help you prepare for your next M&A Transaction, visit or e-mail today.6
  7. 7. About Merrill DataSite Merrill DataSite is a secure virtual data room (VDR) solution that optimises the due diligence process by providing a highly efficient and secure method for sharing key business information between multiple parties. Merrill DataSite provides unlimited access for users worldwide, as well as real-time activity reports, site-wide search at the document level, enhanced communications through the Q&A feature and superior project management service — all of which help reduce transaction time and expense. Merrill DataSite’s multilingual support staff are available from anywhere in the world, 24/7, and can have your VDR up and running with thousands of pages loaded within 24 hours or less. With its deep roots in transaction and compliance services, Merrill Corporation has a cultural, organisation-wide discipline in the management and processing of confidential content. Merrill DataSite is the first VDR provider to understand customer and industry needs by earning an ISO/IEC 27001:2005 certificate of registration — the highest standard for information security — and is currently the world’s only VDR certified for operations in the United States, Europe and Asia. Merrill DataSite’s ISO certification is available for review at As the leading provider of VDR solutions, Merrill DataSite has empowered nearly two million unique visitors to perform electronic due diligence on thousands of transactions totalling trillions of dollars in asset value. Merrill DataSite VDR solution has become an essential tool in an efficient and legally defensible process for completing multiple types of financial transactions. Learn more by visiting today. About Merrill Corporation Founded in 1968 and headquartered in St. Paul, Minn., Merrill Corporation ( is a leading provider of outsourced solutions for complex business communication and information management. Merrill’s services include document and data management, litigation support, language translation services, fulfilment, imaging and printing. Merrill serves the corporate, legal, financial services, insurance and real estate markets. With more than 5,000 people in over 40 domestic and 22 international locations, Merrill empowers the communications of the world’s leading organisations.European Headquarters101 Finsbury PavementLondon EC2A 1ER, UK+44 (0)207 562 3200Merrill CommunicationsWorld-Wide House, 5th Floor19 Des Voeux Road CentralHong Kong+852 2536 6640Corporate HeadquartersOne Merrill CircleSt. Paul, MN 55108800.688.4400Offices in major citiesthroughout the Windows, Windows Explorer and Microsoft Outlook are registered trademarks of Microsoft Corporation in the United States and other All rights reserved. MC0210EU_1 M E R R I L L D A T A S I T E