When it comes to mergers and acquisitions, there are a lot of different approaches to save costs and save time. We asked M&A experts to share their tips for a quick and painless sale process.
Even mergers and acquisitions deals that seem to be relatively easy might have a lot of moving elements. 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.
Because roughly one third of transactions end up taking more time to close than was anticipated at the start, it is imperative that sellers do all in their power to keep the process moving ahead. To ensure that this occurs, there is only one method that has been tried and shown to be successful: thorough preparation.
The work invested early on in the process organizing the data room will, according to professionals in mergers and acquisitions, pay off in significant ways later on. A seller may save themselves time, money, and eventually realize more value by taking solid control of the selling process from the very beginning. This will avoid any price-chipping that could occur in the last moments of the transaction.
It all makes perfect sense. But what exactly does it look like when effective planning is put into action?
Look through the buyer’s lens of mergers and acquisitions
The guiding principle that I always followed was to ask myself, if you were going to acquire the asset, what information would you want to have? On such topics should be the primary focus of your attention. According to John Easton, a former head of due diligence at AstraZeneca who is now an advisor to Sterling Technology, “We always looked through the buyer’s lens. Easton has completed around $7.5 billion worth of sell-side agreements in the past.
For instance, if the company that is up for sale does business on a mergers and acquisitions of global scale, prospective buyers should ask themselves if they would concentrate on the goods or the nations. They may be interested in one or more areas, or they may be interested in the whole portfolio.
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According to Easton, taking a look at the mergers and acquisitions transaction from their point of view is very necessary in order to ensure that the information that is stored in the data room is organized in the most efficient manner.
This has a direct impact on the organization of the index inside the data room. 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 advisors will need to concentrate on and reduces the amount of queries that suppliers need to face in response to the issue.
According to him, another way for vendors to save time is by effectively managing the question and answer process. This will cut down on the amount of questions that need to be answered and will enable the process to go forward more quickly. Questions from bidders will remain anonymous, but they will be made available to everyone along with the replies.
Simple, doable actions to take of mergers and acquisitions
Hall also emphasizes three fundamental and practical actions that sellers may take to guarantee that the information they post in the data room will be easily understood by prospective buyers and their advisors.
Otherwise, you’ll have to deal with thousands of questions,’ he warns the vendors, urging them to compile a complete list of the acronyms that they use internally, complete with explanations, and to ensure that the data that each function reveals is examined by someone from a different function, in order to offer a new pair of eyes with an unbiased perspective.
The peer reviews were absolutely key in making sure the information was comprehensible and coherent,” he adds. “I can’t overstate how important they were.
Use the best technology tools of mergers and acquisitions
In the same vein, ensuring that your data room supplier provides a variety of technological solutions that will make the lives of bidders simpler can assist in expediting the process of completing transactions.
In the process of preparing material to be released, an integrated redaction tool may save a lot of time, and prospective bidders will be grateful for a translation tool that allows them to view papers in their native language. According to Steve Dobson, Chief Revenue Officer of Sterling Technology, “Features like these create a safe environment that facilitate deals in a fast and compliant manner.
Security measures are obviously vital but can also make the data in the room more useful to bidders. For instance, the capability to secure Excel files in their original format is crucial since it will enable bidders to conduct their own computations on the protected files rather than just seeing a flat pdf picture of the file. This is important for a number of reasons.
It is also essential to have a comprehensive text search tool of mergers and acquisitions that works across all file kinds, including scanned photos; nevertheless, this feature cannot make up for the absence of a well organized and indexed data room. Warning: “It’s not a substitute for building your data room properly,” says 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 essential to guarantee that potential of mergers and acquisitions bidders can make effective use of the data room and, as a result, keep the process going forward. It is the responsibility of the vendor to guarantee that the supplier of their data room will give training and user assistance directly to the bids, without the bidders having to go via the vendor.
Just like everything else that happens throughout the process of closing a purchase, due diligence will only be successful if the seller spends sufficient time – at the appropriate time – planning and preparing.