KUHN CAPITAL Tuesday, March 20, 2018
How we do it - managing the M&A process

find buyers, find sellers, sell-side, buy-side, book, non-disclosure, negotiate, close
Guiding the process of a merger or acquisition is a time-consuming, intensely analytical process. Simply put, we seek the lowest purchase price for a buyer and the highest sales price for a seller. We are compensated primarily on our ability to succeed at this, but doing so with a complex information business is not trivial. However, itís also not mysterious ó it mostly requires the methodical, intelligent and experienced application of effort.

Over the years we have refined the process through which we move client M&A campaigns. This process differs for buyers versus sellers, of course, but by way of example weíve outlined below the stages of a sell-side campaign.


We start by thoroughly understanding the clientís business: its technology, financial condition, market, strategy, management, competition and any other factor that may influence its value and future.

To guide our preliminary estimates of transaction value, we reference our internally developed database of hundreds of similar deals. We often nearly complete this Assess & Value stage before entering into a formal client relationship, since we must first be convinced that we can actually advance our clientís objectives. Assessment usually consumes several weeks and during it we often also produce suggestions and analysis that enhance the clientís sales value.


The Sellerís Memorandum, a.k.a. the "book," is a document we circulate among qualified prospective buyers that details all pertinent aspects of the sellerís business and that fairly promotes its prospects.

Writing a good book is hard work ó itís an accurate, thorough business analysis combined with readable, jargon-free prose. Many mergers and acquisitions firms delegate book writing to junior staff. We believe this stage is too important to be left to the inexperienced. Often we have been told that our concisely drafted books played a crucial role in attracting the best buyers. Book writing usually requires about a month, much of this taken up by client responses to our due diligence inquiries.


We provide clients with comprehensive buyer market coverage, yet do so with discretion, minimizing unqualified prospect contact. Realizing these divergent goals requires a coordinated, almost military, marketing campaign.

We utilize a variety of sources like personal relationships, "networking," industry publications, research studies, trade shows and organizations, etc. to uncover prospective buyers. Of these many sources, the most important is the personal relationship, a product of our years of focus on the information industry. Our survey of market interest typically generates several hundred initial prospects, requires about a month to complete, and occurs coincidentally with book writing.


Of the several hundred initial buyer prospects, about 20 survive the next qualifying step: a closer look at the prospectís qualifications and the requirement that they sign a confidentiality agreement (or "NDA") before receiving a book. This stage of closer qualification and book distribution usually requires about two weeks.


We assemble seller information which is too detailed or sensitive for book distribution (materials like legal documents, employee rosters, client lists, accounting records, etc.) in a "data room" usually located off-site, but near, client premises.

We invite only those few prospective buyers who indicate a willingness and ability to meet the sellerís price beforehand, and who are approved by the seller, to visit the data room. For example, while 20 prospects may qualify to receive a book, only about seven may receive and accept a data room invitation. While there to review various documents, usually six to eight weeks after book distribution, they also entertain a presentation about the business by key members of the sellerís management team.


After closing the data room, we set a time limit of about three weeks for interested parties to submit a bid or letter of intent to purchase. Since bids often include combinations of cash, notes, consulting and employment contracts, and additional payments based on future performance, we advise the client on valuing these components and on ranking the bidís overall attractiveness.

Sometimes, in evaluating a bid, we even attempt to quantify the value of buyer-seller chemistry or the likely effect of the transaction on the careers of key employees. Finally, from among all bids, we and the client select one upon which we concentrate to maximize value.


The last stage consists of working with the leading prospective buyer to enhance and precisely define a purchase agreement. At this juncture, our preference is to close a sale to our first-choice buyer. However, should these negotiations falter, we may recommend returning to an earlier candidate.

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