Competitive auction overview

Planning Development
• • • • Develop investment case Develop business plan Select initial buyer universe Highlight transaction issues Choose the right process Create timelines/responsib ilities Set transaction structure Appoint advisors

Execution • Preparation
• Due diligence/data gathering (including vendor Due diligence and data room) Develop position thesis Resolve transaction issues Develop review financial forecasts Prepare Teaser/ Information Memorandum Valuation

• Due diligence/data gathering (including vendor Due diligence and data room) Develop position thesis Resolve transaction issues Develop review financial forecasts Prepare Teaser/ Information Memorandum Valuation

• • • • • Discuss the final offers submitted Contract the negotiations (including SPA) Final due diligence Documentation Closing

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Key milestones

Kick-off meeting

Documents/ Materials ready

Final offers

Summary of M&A process Bidder selection Bidder contacts Approach all interested buyers with Teaser Bidder signs CA Bidder receives information Memorandum and Process Letter Request first round offers Selected in comparative bid analysis Final negotiationsa Selected bidders receive Process Letter 2 Bidders receive “Vendor due diligence” and “legal documents” Bidders receive access to dataroom and meet management Request final bidding offer Stage 3 No End Yes Stage 2 .

17. Suppliers – – – – – – Top 10 suppliers Supplier agreements 12. and copyrights Software license agreements Employment agreements/benefits Employee options details Summary of owned/leased real estate Deeds. 3. trademarks. Management and Employee Matters – – – – – – Operational Overview Contracts and agreements Machinery and equipment leases List of current programs List of completed programs Property Overview Insurance Research and Development 5. – – Litigation List of pending or threatened litigation List of judgments and settlements Charters. Intellectual property – – List of patents. 4. Financial Information – – – – – – Audited financial statements Financial model 9. mortgage documents. Legal Documentation – – 15. 6. and leases List of insurance policies List of insurance claims 2. Debt – – – – Regulation . 7. 10. Organization and Structure – – Corporate organizational chart Board of directors meeting minutes 8.Dataroom Index 1. 11. by-laws Governmental regulations and filings List of outstanding debt Credit agreements and indentures List of appropriate regulatory agencies List of any necessary permits Sales and Marketing Top 10 customers Customer agreements 14. – – Environmental Matters List of environmental issues Compliance certificates Products and Markets Top 10 competitors Market consulting reports 13.

Teaser • The teaser is a marketing document frequently used to assess the interest of the potential buyers. while allowing the seller to maintain the name of the asset confidential. – – – – – Summary description of the opportunity Detail of key selling points Headline operating figures May have key financials Key contact of the people managing the process While it provides enough information to the potential buyer to demonstrate its interest. mostly public information on the asset. the teaser allows the seller to maintain the identity of the asset confidential (if the seller wishes to do so) • The teaser is the pre-cursor to the confidentiality agreement – . The teaser includes general.

distribution of confidential information and communication between the potential buyers (or their advisors) and the seller. the confidentiality agreement should include clauses on destruction of all information provided to the potential buyers at the request of the seller or the sellers financial advisors Potential buyers to be bound by the confidentiality by the confidentiality agreement for an agreed time period Each potential buyer will have comments and changes before they sign Acceptance of proposed changes driven by the need to balance confidentiality with a desire to keep as many potential buyers involved Negotiation process to be led by financial and legal advisors – – • Initial draft of the confidentiality agreement to be prepared by the sellers advisors – – – • A key feature of the agreement should be to prevent potential buyers from colluding in the process . management of the target or the seller’s advisors (e. all interested parties must agree and return a signed confidentiality agreement – The confidentiality agreement should include stringent conditions on access to information. no approach can be made to the management of the target without the sellers express consent) In addition.Confidential agreement • • Before starting any disposal process the seller needs to guarantee the confidentiality of the information about the business made available to the potential buyers – Confidentiality extended to all the advisors of each potential buyer Prior to receiving information memorandum.g.

conditions of the offer . guaranteed financing for the offer.Process letter • The letter sets out the auction process and the rules to be adhered to by all prospective buyers – Timeframe for the transaction and details of significant events – Key contacts on the sellers side – Information to be included in each buyers documentation • It is important to maintain an orederly auction with all participants moving at the same speed so that full evaluation of offers can be made and offers are compared to each other on equal basis – A well drafted process letter allows for maintenance of competitive auction • Follow on process letter (normally referred to as second round letter) to be sent to the bidders selected to make a binding offer – Control of process (including such matters as dataroom and SPA) by the vendors is crucial to maintain bargaining power – Potential to propose management presentations/site visits – Key binding offer information: definitive price. necessary corporate approvals.

Information memorandum • Key commercial information sources ipon which the potential purchaers will make their offers – Substantial amount of time and effort needs to dedicated to the production of quality documents There are reputational risks associated with delivering a sub-standard information memorandum or management presentation that have not been properly verified Reliable financial information Information about the business/asset Overview of licensing arrangements (if any) Overview of key contracts (if any) A vendor due diligence is a perfect complement to these documents. The information on the vendor due diligence will be verified and will guarantee the accuracy of the data included in the information memorandum and management presentation • • Selling documents. which must be accurate and balanced to retain credibility – – – – – – Certain information is of paramount importance Sample information memorandum table of contents • • • • • • Executive summary Market overview Business overview Current operations Upside potential Business plan • • • • Equipment and infrastructure Human resource and IT Financials Legal considerations .