I've had a few case questions in recent interviews about steps in the sell-side advisory process, and was hoping to clear up some questions.
First, I know a pitch book is created when trying to win a mandate to represent the target in the auction process, but is a new pitch book created after winning to send to financial and strategic buyers? Is a unique pitch book created for each buyer or is it a general book?
Also, does the I-Bank change its initial valuation after winning the deal, or is it set in stone at that point? Would a company get upset if an I-Bank valued their company highly to win the deal, then dropped the valuation a bit when courting buyers? What if they found out some issues about the company that they didn't know earlier in the process, i.e. the company will have negative cash flows in the next few quarters?
Does the overall process change much from advising on a public company on an acquisition to advising a private company on an acquisition?
Thanks for the help.
bump......come on, I know this is a softball for those of you already working.
a typical sell-side process, known as a two-stage auction process is as follows:
1. pitch and win the mandate
2. send out a teaser and confidentiality agreement ("C/A" or "Confi") to the prospective buyers (after, of course, coming up with the appropriate buyers list). the teaser is a short (~2 page) document that has some basic overview information about the company you are selling and is usually on a no-names basis.
3. send out an Information Memorandum (aka "IM" or Confidential Information Memorandum or "CIM" or Offering Memorandum "OM" or Confidential Offering Memorandum "COM") to the prospective buyers who are interested and have signed C/As. This document is a much longer (~30-60 pages or more) overview of the company's business, sort of like an annual report, but written with a marketing spin. It will contain financials, information about operations, products, technology, mgmt, etc.
4. Inform the prospective bidders when first-round bids are due. Bidders will have to make offers based only on the information in the IM but these bids will be non-binding.
5. Receive bids and decide who to invite into the second round (hence, a two-stage process).
6. Invite the prosective buyers for management presentations where they will listen to management talk about the company, have some Q&A and go on site visits. Around this time, you will also open up the dataroom to prospective buyers. the dataroom (almost always electronic today) is a database of lots and lots of documents (financial, legal, marketing, etc.) that the buyers and their advisors need for due diligence.
7. After a period of weeks or months for further due diligence by the buyers, second and final round bids will be due. These bids will be binding. In addition to the proposed purchsae price, the buyers will have to answer other questions, such as how they will finance the deal, what contigencies they may have, major reps and warranties, internal approval process, etc. Sometimes they will also be asked to markup a purchase agreement that you (the lawyers on your side) will send them.
8. Decide who wins. Purchase price is obviously most important but also important is certainty of closing and speed of closing. The lawyers will now negotiate the final contract.
9. Closing dinner and you get a dealtoy/lucite, that you as the analyst likely designed.
To answer your other questions: a pitch is just used for marketing. The other docs have their own name (as described above). You are correct that the valuation in your pitch will likely be agressive (as will the time-line for executing the deal). Sophisticated clients know that all banks do that. Less sophisticated clients may not know this any may be more pissed off when the valuation comes in much lower. You will come up with excuses and b/s reasons why. Lastly, there are obviously important considerations when selling a public vs. a private company but generally the process is the same.
Hope this helps.
awesome info, thank you. This helped me nail my interview today.
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