In this post I shall be covering the topics of Proceeds, Process and Proposal.
Stage 4 – Proceeds
1. Valuation – Evaluate and establish the likely valuation of the company – understand the history, current trading and forecasts along with risk factors
2. Acceptable Outcomes – Agree in advance the acceptable outcomes of the proceeds – all shareholders to commit to this
3. Nature of Proceeds – Discuss and agree the nature of acceptable proceeds – cash, shares, loan notes etc. Different shareholders may have different priorities
4. Comparable Transactions – Consider comparable transactions and valuations
5. Valuation History – Measure against historic investment and valuation
6. Ability to Pay – Evaluate the ability and inclination to pay against the potential acquisition partners – consider historic transactions, funding, access to capital markets, current balance sheet strength
Stage 5 – Process
1. Contact – Contact buyers – identify and contact key executives in buyers, distribute teaser, sign NDA, issue Information Memoranda, answer questions for further information
2. Indicative Response – Request indications of interest and value – issue a standard set of terms asking potential partners to scope their proposals within this framework
3. Short List – Establish short list of potential partners – negotiate terms with short list – then move negotiations with limited number (1,2 or 3) into due diligence phase, key conditions, evidence of finance (ability to pay)
4. Stage 1 Due Diligence – Prepare and issue first draft of sale and purchase agreement – vendors lawyers to prepare – provide access to data room (possibly on a limited basis – data room 1) to potential buyers, management presentations and site visits if appropriate
5. Stage 2 Due Diligence – Exclusivity and time table to completion; complete due diligence (data room 2) and finalise negotiations with purchaser.
6. Close – Complete sale and manage communication with external and internal stakeholders – shareholders, management and employees
Stage 6 – Proposal
Adviser’s Engagement Terms should cover:
1. Retainer – Monthly Retainer
2. Success Fees – Min Success fee
3. Ratchet – Success Ratchet
4. Costs & Expenses – Reasonable costs and expenses
5. Progress Reports – Regular progress reports
6. Alignment of Interest – Fee structure aimed at aligning interests of Adviser with shareholders
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