Before and after LOI
Can someone please explain to me what kind of work is usually done before a LOI is signed and after a LOI is signed?
Thanks.
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It really is contingent upon the deal and the type of deal. For example, it may differ based on whether it is a formal process with multiple rounds/bidders or if it is a negotiated transaction between two parties. Generally, the buyer will do a substantial amount of due diligence prior to submitting an LOI (this is not always the case). The LOI may contain certain contingencies and clauses (such as a Material Adverse Change "MAC" or a financing contingency that may jeopardize the deal). Some LOIs may include a break up fee to protect the buyer or a go shop clause which allows the seller to go out to the market to beat the buyer's proposal, the buyer may have a last look and an opp to out bid alternative suitors. Generally after an LOI is done there is either confirmatory due diligence or just a matter of executing documents and setting up wire transfers. Hope this helps
From an analyst's stand point. When would you do most of the "learning" and modeling, before or after the LOI?
like junksbondswap said, it kind of depends on the deal and when you do most of the due diligence, but it also depends on the fund you work at. some funds put in a very "loose" LOI with a lot more diligence to be done after (ie "modeling and learning" for the analyst)...others will make you build a model before any LOI is submitted to see if it makes sense. Kind of depends on the deal and the dynamics of the office (your workload, what the MDs and VPs expect, etc.)
-Patrick
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Did anyone else mistake the title to be "Before and after Laugh out loud"?
Is the merger agreement signed before or after its passed by the shareholders. Is the general timeline 1) initial discussions 2) letter of intent 3) more due dilligence 4)Refinements to initial agreemtn 5) Board vote 6) merger agreement 7) SEC filing 8) shareholder vote 9) payment and integration
Also, on average, when do they tell the public? Is it after the LOI because of fiduciary responsibility for full disclosure?
??
Can anyone with experience comment..
LOI's (Originally Posted: 06/10/2008)
How long does it take to get an LOI with a price out to management?
They can put out an LOI as quickly as they want if they are comfortable with the company/industry/due diligence. An LOI will have some outs in it so its not binding. An offer, on the other hand, would take longer, obviously. PE firm professionals usually have to go to their investment committee to get support for their deal.
If a financial buyer already has a portfolio company that is Accretive with the target, then the financial can afford to pay a synergy premium. If the target will be the first company in the portfolio, then it is not likely that they would pay a premium even if they look to tack on related acquisitions later on.
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