M&A Activity -- Expect a Surge in Mergers
Do it Myself or Hire Outside Help?
Owners who decide to sell must decide whether or not to manage the sale process themselves or hire an outside firm to do the work. This decision often is made based on the size of the company, management's financial expertise, management's M&A expertise, the need for internal confidentiality, what the company can afford and the amount of management disruption arising from the complex activities associated with selling a company.
These proactive sellers must then develop or cause their representative to develop an information package, either in the form of an Offering Memorandum (aka Descriptive Memorandum) or a less desirable package of financial and operational documents, which describe their companies.
This information, whether formally or informally prepared, must contain outside accountants' compiled, reviewed or audited statements for, at a minimum, the past three years; an internally prepared, year-to-date balance sheet and income statement; a schedule of fixed assets and accumulated depreciation; and other documents that describe the customer base, sales effort, operations and management.
Who Are My Most Likely Buyers?
The next step requires the preparation of a buyer list appropriate for the transaction. A local, $2 million, general commercial sheetfed printer, for example, would not list RR Donnelley as a potential buyer. Donnelley is a multibillion dollar, international printing company and, although someone at its Chicago headquarters might be gracious, its M&A department wouldn't be interested.
The small local printer's buyer list should include larger local competitors and, if known, any print salespeople or local competitor's managers interested in owning their own company.
Do not overlook the managers in your company as potential buyers in a Management Buyout (MB0) or the possibility that your employees can buy out your shares in an Employee Stock Ownership Plan (ESOP).
Whatever your category, the preparation of a buyer list must be selective and specific to your company. A massive shotgun solicitation wastes time and can create problems associated with confidentiality and rumors.