starting a m&a from scratch
TRANSCRIPT
TODAY’S DISCUSSION
• INTRODUCTION • GENERAL PRINCIPLES
– VALUATIONS – SUCCESS FACTORS
• GOALS • SWOT ANALYSIS • CRITERIA DEVELOPMENT • PROCESS STEPS • IMPLEMENTATION PLAN
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INTRODUCTION – CHARLES E. WECHSLER
EXPERIENCE • 25 Years Environmental Consulting
– Field Geologist (Dames & Moore)
– P&L Manager (Dames & Moore)
– Director, Mergers & Acquisitions (IT Group)
– Owner (Geologica)
– Independent Consultant (Mergers & Acquisitions, Project Management)
EDUCATION • BA Physical Sciences / Geology (Colgate University)
• MBA (University of Southern California – IBEAR)
• JD (Concord School of Law)
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GENERAL PRINCIPLES
• MERGERS ARE DIFFERENT FROM ACQUISITIONS
• MORE THAN 50% OF ACQUISITIONS FAIL TO MEET PLANNED GOALS
• ACQUISITIONS TAKE TIME, EFFORT AND CUT ACROSS ALL BUSINESS ACTIVITIES
• VALUATIONS WILL VARY WIDELY
• SUCCESS DEPENDS ON MULTIPLE KEY FACTORS
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VALUATIONS
• SELLER AND BUYER USUALLY DIFFER WIDELY TO START
• SEVERAL METHODS OF VALUATION
1. Premium Over Stock Price
2. Multiple Of Revenue
3. Multiple of “Profit”
4. Based On Similar Transactions
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SUCCESS FACTORS
• WELL-DEFINED ACQUISITION STRATEGY • REALISTIC GOALS & EXPECTATIONS • CONVINCING “STORY” TO TARGET AND MANAGEMENT • GOOD CULTURAL AND PERSONNEL FIT • CAREFULLY PLANNED INTEGRATION, START EARLY! • PERSONNEL BUY-IN/INCENTIVES/RETENTION • CLIENT RETENTION • SIMILAR CORPORATE POLICIES AND BENEFITS • PROPER DUE DILIGENCE (DEAL KILLERS?)
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PROCESS STEPS
• DETERMINE BUSINESS/ACQUISITION GOALS AND CONFIRM MANAGEMENT SUPPORT
• PERFORM SWOT (STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS) ANALYSIS TO SHAPE ACQUISITION PLAN AND APPROACH
• DEVELOP KEY CRITERIA FOR HIGH PRIORITY TARGETS
• INSTITUTE PROCESS TO IDENTIFY POTENTIAL TARGETS AND SELECT HIGH-PRIORITY TARGETS
• DEVELOP “INTERNAL” AND “EXTERNAL” SALES’ APPROACHES FOR HIGH-POTENTIAL TARGETS
• APPROACH HIGH-POTENTIAL TARGETS / DUE DILIGENCE / VALUATION / NEGOTIATION / CLOSE
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GOALS / MANAGEMENT SUPPORT
• FINANCIAL GROWTH • GEOGRAPHIC • SERVICES AND SCOPE • TECHNOLOGY • BRAND/REPUTATION • TIME FRAME • SIZE AND SCOPE OF ACQUISITIONS • MAINTAIN/CHANGE COMPANY VISION • MANAGEMENT SUPPORT – LITERALLY, “BUY-IN”
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“SWOT” ANALYSIS
• STRENGTHS, WEAKNESSES, OPPORTUNITIES, AND THREATS
• USE SWOT ANALYSIS TO DETERMINE WHICH AREA(S) THE ACQUISITIONS ARE TO ADDRESS
• CAN BE SPECIFIC TO OVERALL COMPANY, DIVISION, SUBSIDIARY, ETC.
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CRITERIA DEVELOPMENT
• Strategic Fit • Valuation • Services • Culture / Brand • Services / Industry
Sectors • Client Base
• Profit & Loss • Geography • Facilities &Equipment • Intellectual Property • Legal • Human Resources • Integration
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IMPLEMENTATION PLAN I
• IDENTIFY CANDIDATES (“HOPPER”) • PRELIMINARY EVALUATION (“ASD”) • FOCUS ON SEVERAL KEY CANDIDATES • TAILOR APPROACHES TO CANDIDATES • INITIAL APPROACH TO ONE OR MORE CANDIDATES -
NON-DISCLOSURE AGREEMENT (“EXTERNAL SALE”) • UNDERSTAND CANDIDATES’ BUSINESS AND SELLING
RATIONALE • UNDERSTAND VALUATION EXPECTATIONS • PRELIMINARY DUE DILIGENCE
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IMPLEMENTATION PLAN II
• MANAGEMENT PRELIMINARY APPROVAL? • LETTER OF INTEREST • THOROUGH DUE DILIGENCE • PRELIMINARY INTEGRATION PLAN • GET MANAGEMENT APPROVAL TO NEGOTIATE?
(“INTERNAL SALE”) • NEGOTIATION / VALUATION • DETAILED INTEGRATION PLAN • CLOSE?
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