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  2. Prepare Data Marketing Initial Contact Preliminary Investigation Price/Structure Discussions Intent to Proceed Due Diligence Final Definitive Agreement Closing the Transaction Post Closing Issues METAMORPHOSIS OF AN ACQUISITION/DIVESTITURE

  3. TIME LINE From the Perspective of the Buyer Identify Target Investigate Target (NDA) Negotiate (LOI) Due Diligence Definitive Agreement Closing Post Closing Integration

  4. ACQUISITION TEAM • Corporate Transaction Team • CEO and/or corporate officer in charge of transactions • CFO • Corporate Counsel • Human Resources Group • CTO or Chief Technology Officer/IP Engineering • Public/Investor Relations • Outside M&A Counsel • Investment Banker • Accountant

  5. PREPARATION OF DATA & MARKETING • Professional Help • Business Broker or Investment Banker • Accountant • Attorney • How to Market the Target • Is there a Likely Buyer? • Can the Strategic “Players” be identified? • Will the Target be Marketed through a Broad Solicitation? • Is Target a Good Candidate for a Financial Buyer?

  6. INITIAL CONTACT • Identification of Potential Buyers • Qualification of Initial Buyers • Confidentiality Agreement • Submit Information to Potential Buyers

  7. CONFIDENTIALITY AGREEMENT Before any Confidential Information is Exchanged, the Prospective Buyer Should Agree to Keep All Information Confidential

  8. WHAT THE PROSPECTIVE SELLER WANTS • Protect Confidential Proprietary Material from Disclosure • Protect Against Use of Proprietary Information • Prevent Disclosure of Potential Transaction • Non-Interference with Business • To Not be Committed

  9. WHAT THE PROSPECTIVE BUYER WANTS • Access to Evaluation Material • Answers to Relevant Questions • Protect and Right to Use Information Independently Received or Developed • No Liability for Third Party Accidental Disclosure • No Commitment to Buy • Exclusivity to Look at the Deal

  10. Definition of Confidential Information


  12. Exception to Evaluation Material

  13. Although you understand that the Company has endeavored to include in the Evaluation Material information known to it which it believes to be relevant for the purpose of your investigation, you further understand that neither the Company nor its agents or its representatives makes any representation or warranty, express or implied, as to the accuracy or completeness of the Evaluation Material

  14. Restriction Against Soliciting Employees

  15. LETTERS OF INTENT Documentation of the Proposed Transaction Prior to a Final Agreement

  16. Prepare Data Marketing Initial Contact Preliminary Investigation Price/Structure Discussions Intent to Proceed Due Diligence Final Definitive Agreement Closing the Transaction Post Closing Issues METAMORPHOSIS OF AN ACQUISITION/DIVESTITURE

  17. PURPOSES OF AN LOI • To commemorate an understanding (usually non-binding) concerning the price, structure and procedures for a proposed transaction • To establish the basis upon which the proposed Buyer will proceed with due diligence of the Target • To protect the Buyer against the Target “shopping the deal” • Identify “deal killers” up front, and make negotiation of definitive agreement easier

  18. PERSPECTIVE OF BUYER • Need to Obtain Additional Information to Confirm Economics and Other Attributes of the Proposed Transaction • Need to Identify Risks • Need to Obtain Information to Plan Post-Closing Integration • Try to Limit Negotiations with Other Potential Buyers • Obtain Some Assurance that Spending Time/Money on Deal is Worthwhile

  19. PERSPECTIVE OF SELLER • Do Not Cause Disadvantages in Subsequent Negotiations • Keep it Confidential until Buyer is Contractually Bound • Protect Confidential Information • Do not Foreclose Other Possible Buyers

  20. IMPORTANCE OF MAKING THE OBLIGATIONS OF THE PARTIES CLEAR • Are the Parties Agreeing to be Bound? • Is there an Obligation to Negotiate? • Are the Negotiations Exclusive? • What Happens on a Withdrawal? • What Happens if an Alternative Transaction is Consummated?

  21. PUBLICLY HELD ISSUES • Is a public announcement necessary upon signing a letter of intent? • What if the Board of Directors of a publicly held Company gets a subsequent higher offer? • What duty does a Board of Directors have to auction the Company or make some other determination that it has obtained a “fair” price on behalf of its shareholders?

  22. ….a material definitive agreement which is subject to customary closing conditions, such as the delivery of legal opinions or comfort letters, completion of due diligence or regulatory approval, must be disclosed under Item 1.01 when such agreement is enforceable against or by the company despite the fact that such conditions have not yet been satisfied. However, if a company enters into a non-binding letter of intent or memorandum of understanding that also contains some binding, but non-material elements, such as a confidentiality agreement or a no-shop agreement, the letter or memorandum does not need to be filed because the binding provisions are not material. Note 39 to SEC Commentary to Final Revisions for 8-K Filing Requirements – August 23, 2004

  23. IS THE LOI ENFORCEABLE? • What is the “intent” of the parties? • Do they intend to be bound? • Is a further agreement contemplated? • Did the signers have the ostensible authority? • Are the material terms of the agreement adequately described? • To what extent are one or both parties relying on the transaction to proceed?

  24. THREE POSSIBLE STAGES OF LOI • There Is No Current Intent to Have a Contractual Relationship • There Is a Contract (Even If There Is a More Formal Contract Contemplated) • There Is Some Understanding That If Everything Goes “OK”, the Proposed Transaction Will Be Consummated.