M&A Deal Process: A Comprehensive Guide

The M&A deal process is a complex and multifaceted procedure that involves several stages. Here are the details of the M&A deal process:

Sending the Teaser: The first step in the buy-side M&A deal is when the IB sends a teaser. This is a one to two-page summary of the potential sales process that does not include the name of the target to maintain confidentiality. The objective of the teaser is to give a larger audience an understanding of the value of the company.

Signing the NDA: Once the teaser is reviewed by the potential buyer and they decide to explore the opportunity, the next step is to sign an NDA (non-disclosure agreement) to maintain confidentiality.

Sending the CIM: The IB sends the confidential information memorandum (CIM) to the buyer, which shares complete information about the seller company, including the identity. The CIM contains the investment thesis of the company, an overview of the company, sector, products, services, employee profiles, revenue profile, and financial information (both historical and projection).

Facilitating Management Calls: Once buyers start looking at the CIM, they usually need to seek clarification from the management of the selling company. The IB facilitates this call, and the discussion is mostly around the company's capabilities, relevance of financial projects, capital expenditure, relationship with customers, etc.

Valuation and Modeling: This step is on behalf of the buying company, based on the information needed through the CIM and management call. Valuation is performed based on agreed projection, with the objective to come to a range of valuation to start negotiation.

Expression of Interest / Non-binding Offer: The Expression of Interest (EOI) is a formal offer indicating serious interest from the buyer to acquire the business of the seller by paying a certain valuation.

Access to Data Room: Once the offer is accepted by the seller company, the IB opens the data room for the buyer company. The data room is a virtual data drive (like Google Drive) for exchanging the data related to the deal. Access to the data room is closely tracked and logged to maintain confidentiality.

In-person Meeting with Management: In this step, the IB facilitates an in-person meeting between the management of the buying company and the selling company. Usually, a defined spec (single point of contact) from both parties attend this meeting.

Letter of Intent: The Letter of Intent (LOI) is a document declaring the commitment of the seller company to do business (deal) with the buyer company. It's the intent to enter into a legally binding agreement and outlines the key terms and conditions of the deal.

Start of Exclusivity Period and Final Due Diligence: The exclusivity period is the length of time (30-60 days) during which the seller is prohibited from carrying out or furthering activities related to the sale of the firm, other than the buyer with whom the Letter of Intent was signed. Final due diligence is conducted during this time.

Quality of Earnings Report: The quality of earnings report is one of the outcomes of final due diligence. It assesses how the seller company accumulated its revenue, such as cash, woncath, recurring, and won receiving. These key details are generally not outlined in the income statement.

Definitive Agreement: The definitive agreement finalizes all terms and conditions related to the purchase and sale of the company's shares, including title to assets and liabilities. There are two types of definitive agreements: the stock purchase agreement (SPA) and the asset purchase agreement (APA).

Public Announcement and Exchange Disclosure: This is the final step in which the deal is announced in the media for the knowledge of the larger public Disclosure.

In conclusion, if you are planning to execute a merger or acquisition deal or looking for expert advice in this area, our team of professionals is here to help. We have extensive experience in M&A transactions and can assist you in closing a deal or executing your action plan. Our expertise in this field can help you navigate the complexities of the deal process and ensure that your transaction is successful. Please feel free to reach out to us for any kind of assistance or guidance in this matter. We are here to help you achieve your goals and grow your business.