Would love it if some of the senior guys on this site would share their take on the process from client pitch to closed deal, and add anything I may have omitted.
1 - CLIENT PITCH:
Meet with the Client and pitch your firm along with its teams & capabilities. You will often go through multiple pitches to a get to short list of IB's, where the Client will select the IB it feels most fit the execute the transaction.
2 - ENGAGEMENT:
If you get picked by the Client to execute the transaction, the client will 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 payment will include a monthly retainer fee [to cover monthly expenses & salaries] and a success fee upon closing).
BONUS - Pre-Selling:
Depending on the firm you work for, some managing directors will begin to pre-sell the opportunity. (ie. calling PE firms and strategic acquirers to share an opportunity in the space. This is valuable as you can garner interest in the opportunity & or flesh out concerns a buyer may have when pursuing an opportunity in that specific industry.)
3 - INITIAL DUE-DILIGENCE:
The firm then goes into initial due-diligence efforts with the company, where you 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 - CONTENT CREATION:
Using the information you've gathered from due-diligence you will create a Strategy / Story around how to brand the opportunity in the market. It is common to write a Confidential Information Memorandum (CIM) detailing the opportunity in extensive detail (it is not uncommon for these documents to be 20-30 pages in length). Concordantly you will also put together a teaser and pitch-book to present the company to investors in a formal capacity, along with any financial models deemed relevant at that time. This is usually where you value the clients company and peg a market price to achieve in an auction.
5 - MARKET OUT REACH:
After the documents are created, the sales process begins. You will reach out to investors (whom fit the investments criteria), by contacting PE firms or strategic acquirers trying to garner interest in the opportunity. This step will involve numerous high level strategic conversations and follow ups.
6 - CALL FOR IOI's:
Indication Of Interest (an IOI) is a non-binding engagement between a buyer and a seller, detailing a general price the buyer will pay and the make-up of financing (ie. what portion is cash, a sellers note, a performance earnout, a debt obligation etc.). Setting a "Call for IOIs" date incentivizes buyers to submit an IOI by a specific date if they want to move further along in the purchasing process. It's a way of saying "Hey man, if you like this opportunity, show us how serious you are about it."
BONUS - Silent Auction:
Between stage 6 and 7, you are actively creating a silent auction where you reach out to multiple buyers (all of whom do not know who has bidder or at what price). Often times you will have to express to a buyer whether or not their IOI is far below / or within the price range you're looking for. Your goal is to use the silent auction to incentivize buyers to put more money into an opportunity for fear of being out bid by another pursuer. Remember that lovely business lesson on unit price and demand? The higher the demand, the higher the price.
7 - LOI SUBMISSION:
After the IOI call date, very serious buyers will submit and LOI (a Letter of Intent), this letter is a binding engagement that signifies that the buyer and the seller will exclusively engage in post transaction due-diligence efforts to close the offer (effectively taking the deal out of the market). Often times multiple firms will submit LOI's, so it is the job of the Managing Director to find the best price. Sometimes this means getting the buyer to increase their purchase price allocation, or formatting 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 / especially performance earn outs for the CEO if he stays on as a minority interest).
8 - SELECTION:
You sign the most suitable LOI engagement, and begin closing due-diligence efforts with the buyer. Often times this process will 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 during the M&A process. Sometimes during this stage there will be adjustments to the final offer, depending on a variety of factors (how much working capital is left in the business when sold, acceptable adjustments to the income statement, or even how the company is performing during closing due-diligence efforts). If the buyer and the seller find terms which are agreeable, they will draft a final Purchasing Agreement which will be signed by both parties sealing the deal. However, one final word of warning...
9 - CLOSING:
"The deal is never closed until the check has cleared." - To quote my Managing Director