M&A Process at a bank

Proof-read, edited, and expanded these ideas on new thread. Please see full post: https://www.wallstreetoasis.com/forums/complete-sell-side-ma-process-bo…

High Level summary

Sell-Side M&A: 1-Client pitch: Meet with the client and pitch the firm along with your teams & capabilities. You will often go through multiple pitches to a short list of IB's.

2-If you get picked by the company you sign an engagement agreement stipulating that company is to exclusively work with your firm as a sell-side advisory and stipulates what the firm is paid for its work (generally a retainer fee to cover monthly expenses and a success fee upon closing).

BONUS: Depending on the firm, some managing directors will begin to pre-sell the opportunity. (ie. call PE firms and strategic acquirers to express an opportunity in the space, garner their interest & or flesh out concerns a buyer may have when purchasing a company in that specific industry.)

3-The firm then goes into the due initial-diligence phase where the firm will gather information from the company's executive team about strategic operations & strategy, including documents such as (Bi-laws, Amendments, Board of Directors, Minutes, Certificate of Good Standing, List of IP, Schedule of IP including patent #'s and Dates, Cap Table [list of shareholders & ownership share], investor rights agreement, equipment list, equipment schedule, depreciation list, lease agreements etc.).

4-Using the information you've gathered from due-diligence you will then write a Company Information Memorandum (CIM) detailing the opportunity in extensive detail. These documents are anywhere from 20-30 pages long depending on the company. You will also put together a teaser and pitch-book to present the company to investors, along with any financial models deemed relevant. This is usually where you value the company and peg a market price.

5-After the documents are created you will begin Investor outreach, by contacting PE firms or strategic acquirers trying to garner interest in the opportunity.

6-Call for IOI's: IOI's are Initial Offers of Intent and are a non-binding engagement between an buyer and a seller, detailing what price the buyer will pay and what the make up of the deal looks like (ie. what portion is cash, sellers note, earnout, debt etc.). Setting an IOI date incentivizes buyers to submit an IOI if they want to move further along in the purchasing process. It's a way of saying "hey, if you like the opportunity, show us how serious you are about it."

BONUS: between these stages you are actively creating a silent auction where buyers unknowing of one another will actively bid for the opportunity. Often time this means expressing to a buyer whether or not their IOI is far below/ or in the range you're looking for. Sometimes you can use the silent auction to incentivize buyers to put more money down on an opportunity for fear of being out bid.

7- LOI: After the IOI call date, very serious buyers will submit and LOI (a Letter of Intent), this letter is a binding engagement that signifies to the buyer and the seller that they are to exclusively engage in post transaction due-diligence efforts to close the offer (taking the deal out of the market). Multiple firms will submit LOI's it is the job of the Managing Director to get buyers to increase their price or format the makeup of the deal to the CEO's liking (i.e. more or less cash up front / higher or lower sellers note on the back end / even performance earn outs for the CEO if he stays on as a minority interest).

8-Select the best LOI, sign it, and begin closing due-diligence efforts. This will often include an audit or quality of earnings report. You will be in contact will law firms, accounting firms, and consultants representing the buyer who will try to ascertain if the company is in the working condition you portrayed it as. Sometimes during this stage there will be adjustments to the final offer, depending on how much working capital is left in the business, what are deemed acceptable adjustments to the income statement, or how the company is performing during closing due-diligence efforts.

9-"The deal is never closed until the check has cleared." - To quote my Managing Director