Could Brad Pitt and George Clooney have robbed Andy Garcia blind (and stolen his girl) in Ocean’s 11 without help from Casey Affleck’s fake moustache? Probably not. Could Cameron Diaz have taken down the baddies in Charlie’s Angels without some help from Lucy Liu and Drew Barrymore? Obviously not.
That’s because every great plan requires a crack team of individuals each with their own specialized set of skills. While major corporations have the resources to hire sprawling teams of 30 to 40 advisors and consultants to lean on during the six to eight-month process, smaller and mid-market companies need to be choosier. This means ensuring you have a highly nimble but focused team of experts capable of both adapting as new information becomes available during the due diligence process while, at the same time, executing a merger or acquisition in line with the company’s core values.
The DealRoom has broken down the key architects in a successful merger or acquisition and why they’re important so you can assemble your “A-team” for the often-complex road ahead.
What they do: Mergers and Acquisition advisors can come in many forms – from investment advisors to business brokers (usually referring to those who specialize in selling businesses under $5 million) –but either way, the core role is the same: to prep and help execute the business’ buying or selling strategy. This can include ensuring the business is organized to execute due diligence to making sure key customers are onboard with a potential change in management.
Why they’re important: Arguably, the M&A advisor is the chief architect of the deal-making process and should be a trusted advisor to the c-suite. They should also have an expansive understanding of the targeted industry. Since they typically charge a three to seven per cent success fee for managing the move, they are apt to have their hand in every part of the deal and help keep the company owner and executive team in the loop.
What they do: While they sometimes occupy the role of M&A advisor, seeking out buyers or sellers, investment bankers are critical, using their market expertise to establish both what a company is worth and scenarios for how that valuation could evolve and any special variables that could come into play during the process.
Why they’re important: Investment bankers in targeted markets often have a more holistic view than a business owner or executive can have, making them a valuable asset when it comes to the valuation process. Investment bankers can also play a role in defending against activist investors, raising funds for financing deals through selling shares or debt, and even structuring the financial elements of the deals themselves.
What they do: While attorneys are becoming more involved from the early stages of the deal-making process, their role kicks into high gear once it comes time to collate and evaluate the due diligence information. Lawyers use their experience with transaction structuring and securities law issues to foresee any deal-killing elements before the merger gets underway.
Why they’re important: Trusted legal counsel is invaluable, providing a sobering voice in what can sometimes be a heated process. In addition to running through your company’s finances and projections with a fine-toothed comb, legal counsel will also examine everything from ownership interests and outstanding contracts to all other potential legal liabilities that could sink the deal.
What they do: Like mergers and acquisition and corporate lawyers, tax-focused legal counsel could also be called upon to go over both sides due diligence and see what role taxes play in the process. They put their expansive knowledge of the Internal Revenue Code to work, highlighting any tax complications that can arise in the structuring and sale of a business.
Why they’re important: Sure, this role could fall under “legal counsel” but given the importance of it, we chose to identify tax lawyers as their own class on the A-team. For instance, their expertise is critical in identifying the potential to structure as transaction as a tax-free reorganization, whether or not the sellers can receive capital gains treatment or be subject to two levels of tax. They can also find any net operating losses the seller might have accrued or establish the buyer’s tax basis in the acquired assets.
What they do: Essentially, accountants are the “buddy cops” to their legal counsel counterparts, ensuring the financial statements fit within the generally accepted accounting principals (GAAP) and making sure valuations are on point. Tax accountants do the same thing but specific to tax strategy including assessing how decision can impact after-tax cash proceeds for the shareholders.
Why they’re important: Each accountant plays a vital role in the process. For example, audit accountants can ensure you have defensible earnings information while tax accountants can help navigate any challenges created by cross-border mergers.
Board Members and Management
What you do: Of course we can’t forget the most informed party in the mergers and acquisition process – you. In addition to having an intimate knowledge of your business and the synergy selective deals can create, you, senior management and your board are responsible for keeping shareholders aware of what’s going on as well as representing the interests of key stakeholders. You may also be required to market the company and engage any questions regarding internal company culture.
Why you’re important: There’s no question behind every great leader is a team but the leader is just as important. In addition to being the frontline for interviewing and assembling the crack support team, members of the executive team like the CFO or controller will also be important voices in evaluating investors or buyers as the deal moves forward. The board will play a critical role in offering outside direction as well in the form of constructive criticism, risk management and championing good governance.
M&A tech providers
What they do: In the fast-paced world of M&A action, tech solutions have carved out their own role. Technology like virtual data rooms (VDRs) help businesses streamline the deal-making process while ensuring sensitive company data like earnings and finances is accessed only by those entitled to access it.
Why they’re important: In the due diligence process specifically, virtual data rooms are critical for protecting documents from corporate espionage and cybercrime. But it doesn’t stop there, VDRs keep due diligence materials organized, expediting the process and cleaning up the document review phase all the while keeping a detailed audit rail that can let you know who’s examined what. When the deal is done, all parties from accountants to senior management, can be given access to analyze the success (or failure) of the deal.