M&A Negotiations Survey - Part 3 - Analysis

First of all, many thanks again to all participants of Part 3 of our M&A Negotiations Survey!

As you can see in the result below, entrepreneurs should anticipate around 9 months for a professional execution of a successful sell-side M&A process.

Part 3 - https://lnkd.in/dGHQhwc

Part 2 - https://lnkd.in/dFThTRx

Part 1 - https://lnkd.in/d4ifrju

Part 2 analysis - https://lnkd.in/d3_vYBn

Part 1 analysis - https://lnkd.in/dDrXuAJ

In the following we would like to evaluate the poll result above, also focussing on the necessary requirements for a successful execution within “6 months” and different reasons for a sell-side M&A process, which demanded “more than 12 months” to be closed.

Anticipated Time - “6 to 9 months”

• Notwithstanding different wordings and minor differences in the structuring of single project steps a M&A process is executed generally in the 3 main phases “preparation”, “contacting” and “negotiation”.
• The “preparation” within a sell-side M&A process is mostly scheduled with up to 3 months while the “contacting” takes place in the following 1 to 2 months before it leads to the “negotiation”, where all participants need to be managed for the realisation of a successful signing and closing within 2 to 4 months.

Corresponding to this scheduling a M&A process without any delays should be able to be executed successfully within “6 to 9 months”. An earlier or later closing within this time frame depends mostly on the complexity of the transaction subject and the transaction structure.

Anticipated Time - “9 to 12 months”

The successful execution of a M&A process within “9 to 12 months” usually shows some minor delays, which can be based on serious difficulties as mentioned in our “Part 2 analysis”, but is mostly reasoned with formalities or technicalities:

• Availability of the participants
• The buyer wants to enter the transaction in the next fiscal year
• The transactions needs to be checked by a competition authority
• A business partner of the seller needs to submit a confirmation regarding a change-of-control clause
• etc.

In most of these cases seller and buyer have already agreed on a transaction or have even signed a SPA within 9 months, but the closing requirements need additional time to be executed.

Anticipated Time - “More than 12 months”

When a M&A process takes “more than 12 months” at least one major issue has probably occurred. Beside the potential deal breakers, which are mentioned in our “Part 2 analysis”, many other situations can result in such a major issue:

• Revenue and/or earnings of the seller’s company have dropped
• The interest in acquisitions in the relevant market has changed
• A contract between the seller and a main customer needs to be renewed
• The transaction subject was damaged by accident
• etc.

For the execution of a M&A process it is important to divide these major issues in two groups. While one group contains the major issues, which are know very early in the process and should be solved before the first meeting between seller and buyer takes place, the other group includes major issues, which happen without warning or evidence, which can be openly discussed and then solved together with the buyer.

Anticipated Time - “Up to 6 months”

• The successful execution of a M&A process in a maximum of “up to 6 months” demands a short “preparation” of 1 to 2 months, followed by a very quick “contacting” within a few weeks, which leads immediately to the “negotiation” between seller and buyer.

In these rare cases it is possible to close a transaction even in just 3 months, but requires a very low complexity of the transaction subject and the full commitment from seller and buyer to each other from a very early stage.

Following to this analysis we would like to invite again investors, advisors and especially entrepreneurs/founders to participate in Part 4 of our M&A Negotiation Survey below.

Part 4 - https://www.dhirubhai.net/posts/roman-wolkowski-4493828a_negotiation-mergers-acquisitions-activity-6691275610435657729-Y9n8

Thanks for your interest and best regards,

Roman Wolkowski