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There are plenty of ways to save time and money in M&A transactions. We asked M&A experts to share their tips for a quick and painless sale process.
Even supposedly straightforward M&A transactions have a lot of moving parts. But if you have a complex business for sale, a tight deadline and multiple bidders, the risks of losing time and running up costs increase massively.
With nearly a third of deals taking longer to complete than forecast at the outset, it is vital that sellers do all they can to keep the process moving forwards. There is only one tried and tested way to make sure this happens: good preparation.
M&A experts agree that time spent early on organising the data room will pay major dividends later on. By taking firm control of the sale process at the beginning, sellers will save themselves time and money and ultimately realise more value by preventing last-minute price-chipping.
That all makes sense. But what does good preparation look like in practice?
‘Look through the buyer’s lens’
“The mantra I always used was, if you were buying the asset what would you want to understand? Those are the things that you need to focus on. We always looked through the buyer’s lens.” says John Easton, a former head of due diligence at AstraZeneca with around $7.5 billion of sell-side deals under his belt and now an adviser to Sterling Technology.
For example, if the business for sale has international operations, will bidders focus on products or on countries? Will they be interested in one or more regions or the entire portfolio? Looking at the transaction from their perspective is vital if the information that goes into the data room is to be structured in the most effective way, says Easton.
This feeds through to the way the data room’s index is structured. Graham Hall, also an adviser to Sterling who worked on audit tenders, acquisitions and disposals for Nestlé and before that Novartis, says that a well-constructed index will allow bidders to move faster through the due diligence process. It helps to identify the areas their advisers will need to focus on and reduce the number of questions that vendors must field.
Vendors can also save themselves time by managing the Q&A process well, he says. If questions from bidders are anonymised but made visible to everyone, along with the responses, it will reduce the number that need answering and allow the process to move more quickly.
Simple, practical steps
Hall also highlights several basic, practical steps that sellers can take to ensure the information they place in the data room will be readily understood by bidders and their advisers.
He urges vendors to prepare a full list of the acronyms they use internally with explanations – “otherwise you’ll have to deal with dozens of questions” – and to make sure the data each function discloses is reviewed by someone from a different function, to provide a fresh set of eyes. “The peer reviews were absolutely key in making sure the information was comprehensible and coherent,” he says.
Use the best technology tools
Equally, making sure your data room provider offers a range of technology tools that will make bidders’ lives easier will help deals move forward more quickly. An integrated redaction tool can save a lot of time in preparing information to be disclosed, and bidders will welcome a translation tool so they can read documents in their own language. “Features like these create a safe environment that facilitate deals in a fast and compliant manner” says Steve Dobson, Chief Revenue Officer at Sterling Technology.
Security measures are obviously vital but can also make the data in the room more useful to bidders. For example, the ability to protect Excel files in their native format is important because it will allow bidders to run their own calculations on them, instead of just viewing a flat pdf image.
A full text search function that covers all file types including scanned images is also vital – although this cannot be a substitute for a well-structured and indexed data room. “It’s not a substitute for building your data room properly,” warns Easton. And in instances where bidders want to download documents from the data room, digital watermarks and expiry dates are essential to protect confidentiality.
Training is also important to ensure bidders can use the data room efficiently and so keep the process moving. Vendors should ensure their data room provider will offer training and user support directly to bidders, without needing to approach the vendor.
Like everything else in the deal process, diligence will work only if the seller has invested enough time – at the right time – in planning and preparation.
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