The following Transaction Process Planner was developed to describe the tasks, workflow and timing of a "typical" process in the sale of a business. It is our experience that a successful closing is most often assured by clearly defining the roles and responsibilites of the transaction team, and setting benchmarks for the completion of the many elements making up the entire process.
Transaction Process Planner
Statement of Objectives – (Sample)
To identify an acquirer, or merger partner(s) for the Company such that the strategic fit will enable the Company to extract the maximum price. A price expectation of $__ million will be set with the ability to significantly increase this amount based on a reasonable, quantified earnout formula. Consideration will be in the form of cash and/or company stock, and structured so as to maximize the net after tax value to shareholders. The optimum investor/acquirer/merger partner(s) will be evaluated such that future value will be most positively impacted by the addition of the Company's unique value proposition. An important element to be evaluated in any combination with a potential acquirer, will be the ability of the strategic partner(s) to drive the Company’s revenue generating potential through its marketing/distribution capability. The earnout portion of total consideration will be assessed on factors including the percentage of total consideration based on contingency, a formula whereby the Company’s performance will determine success, and a working environment enabling the Company's management to achieve the objectives on which the earnout is based.
Transaction Steps
To achieve these objectives the following transaction steps will be followed:
1) Presale Review and Advice - Working with (CEO?), MTA will identify, quantify, and analyze the Company's services and skill set with respect to market needs and trends. Working with (CFO?), MTA will complete a detailed review and analysis of the Company's pro forma financial statements. Specifically, all anticipated revenue streams, revenue recognition policy, direct costs, and expenses will be examined. Working with (CFO?), MTA will construct pro-forma projections for five years, which will reflect "normalized" expenses appropriate to operations under a public corporate umbrella. The current budget will be examined, refined and supported with data including pipeline and waterfall reports. Prior to the preparation of the Information Memorandum, MTA will draft a one-page company profile and non-disclosure agreement to be used in initial discussions with companies on the Approved List.
2) Valuation - MTA will prepare a valuation analysis incorporating the valuation methods of discounted cash flow analysis, comparable companies, and comparable transactions with adjustments for company specific variables. This material will be available to support discussions pertaining to value.
3) Approved List - MTA will build an Approved List of potential acquirers/merger partners whereby complementary technology, skill sets and marketing capabilities will maximize revenues and profits, the prime drivers of value.
4) Information Memorandum - MTA will prepare a detailed Information Memorandum, with input from designated company transaction team members including sections describing:
- The Company
- Products and Services
- The Market
- Marketing and Sales
- Competition
- Business Plan
- Management, Ownership and Organization
- Financial Information
* historical financial statements
* analysis of year over year performance
* pro forma projections including assumptions
* detailed pipeline of future business
In addition, an Executive Summary will describe the objective of the project and highlight the main points discussed in the body of the Information Memorandum. It will be important to target the Information Memorandum as much as possible to specific acquirers. The sections on Products and Services, and The Market, in particular, may be customized for certain strategic partners.
5) Initial contacts and discussions - MTA will contact and initiate discussions with names on the Approved List. MTA will seek to determine the prospects' strategic vision, technological and marketing capabilities, and lastly, qualify their interest in the Company on a high level without disclosure of the identity of the Company. Based on the prospects signing a non-disclosure agreement, MTA will deliver them an Information Memorandum. Upon the prospects' review of the document, MTA will answer questions and further qualify levels of interest. On a case by case basis, direct contact between (CEO?) and the prospects might be appropriate, especially with regard to detailed questions enabling the prospects to better evaluate a potential strategic fit. The level of information to be disseminated at this stage will be managed carefully.
6) Visitations - MTA will determine with (CEO?) the criteria, extent and timing of visits with respect to maximizing the value of visitations and minimizing any adverse impact of such visits on a client's staff. Prior to arranging on-site visits, MTA will receive oral confirmation and acceptance of the Company's price expectation, or an alternative offer range based on defined "subject to's". MTA will determine with (CEO?) which companies should be invited to visit. On-site visits will be arranged. Follow-up information will be provided to those potential strategic partners with whom the Company wishes to proceed. Any reciprocal visits will be arranged.
7) Bid Process - Depending on the nature of discussions and relationships being built with the most likely strategic partners, MTA may advise that a formal bid process be implemented and establish a date for receipt of letters of intent. If a less formal approach is selected, MTA will serve as the intermediary to negotiate the terms of an agreement to be documented in a letter of intent. Once the letter of intent is agreed and signed the due diligence process will be determined and organized.
8) Due Diligence - Ground rules for the closing process including due diligence will be established. These will include protocol, participants, location, and time allowed. MTA will oversee the process and serve as the conduit between the parties to facilitate the timely and appropriate transmittal of information and documentation. MTA will manage the necessary interactions between the transaction teams.
9) Documentation and Closing - MTA will review all transaction documentation and will work closely with counsel to achieve the optimum transaction terms. MTA assistance here will extend to any employment, non-compete, and other ancillary agreements.
Projected Timeline
Weeks Begin Task Complete Task Continue Task
1-3 Presale Review Presale Review
Valuation Analysis
Approved List
Information Memorandum
4 Initial Contacts* Valuation Analysis Information Memo.
Approved List
5 Information Memo
5-8 Initial Contacts Initial Contacts
6-16 Visitations, Pre-visit Discussions
17-20 Bid Process Bid Process
21-25 Due Diligence Due Diligence
Agreements & Closing Agreements & Closing
* Initial contacts may be moved up based on the pace of completion of tasks begun in weeks 1-3 and certain prospective acquirers, which MTA and(CEO?) may wish to approach earlier than anticipated by the timeline.
With an anticipated start date of _______, this timeline represents a best-case scenario in which all parties are available when needed. Business realities may cause unanticipated delays.
The proposed timeline is based on our experience of managing and completing multiple transactions. While normal slippage has been taken into account, each transaction is affected by a unique set of transaction variables. As such, we will do our best, as indicated by this planner, to initiate and manage a focused and structured approach, which will compel adherence to the proposed timeline by all parties toward a successful completed transaction.
Statement of Objectives – (Sample)
To identify an acquirer, or merger partner(s) for the Company such that the strategic fit will enable the Company to extract the maximum price. A price expectation of $__ million will be set with the ability to significantly increase this amount based on a reasonable, quantified earnout formula. Consideration will be in the form of cash and/or company stock, and structured so as to maximize the net after tax value to shareholders. The optimum investor/acquirer/merger partner(s) will be evaluated such that future value will be most positively impacted by the addition of the Company's unique value proposition. An important element to be evaluated in any combination with a potential acquirer, will be the ability of the strategic partner(s) to drive the Company’s revenue generating potential through its marketing/distribution capability. The earnout portion of total consideration will be assessed on factors including the percentage of total consideration based on contingency, a formula whereby the Company’s performance will determine success, and a working environment enabling the Company's management to achieve the objectives on which the earnout is based.
Transaction Steps
To achieve these objectives the following transaction steps will be followed:
1) Presale Review and Advice - Working with (CEO?), MTA will identify, quantify, and analyze the Company's services and skill set with respect to market needs and trends. Working with (CFO?), MTA will complete a detailed review and analysis of the Company's pro forma financial statements. Specifically, all anticipated revenue streams, revenue recognition policy, direct costs, and expenses will be examined. Working with (CFO?), MTA will construct pro-forma projections for five years, which will reflect "normalized" expenses appropriate to operations under a public corporate umbrella. The current budget will be examined, refined and supported with data including pipeline and waterfall reports. Prior to the preparation of the Information Memorandum, MTA will draft a one-page company profile and non-disclosure agreement to be used in initial discussions with companies on the Approved List.
2) Valuation - MTA will prepare a valuation analysis incorporating the valuation methods of discounted cash flow analysis, comparable companies, and comparable transactions with adjustments for company specific variables. This material will be available to support discussions pertaining to value.
3) Approved List - MTA will build an Approved List of potential acquirers/merger partners whereby complementary technology, skill sets and marketing capabilities will maximize revenues and profits, the prime drivers of value.
4) Information Memorandum - MTA will prepare a detailed Information Memorandum, with input from designated company transaction team members including sections describing:
- The Company
- Products and Services
- The Market
- Marketing and Sales
- Competition
- Business Plan
- Management, Ownership and Organization
- Financial Information
* historical financial statements
* analysis of year over year performance
* pro forma projections including assumptions
* detailed pipeline of future business
In addition, an Executive Summary will describe the objective of the project and highlight the main points discussed in the body of the Information Memorandum. It will be important to target the Information Memorandum as much as possible to specific acquirers. The sections on Products and Services, and The Market, in particular, may be customized for certain strategic partners.
5) Initial contacts and discussions - MTA will contact and initiate discussions with names on the Approved List. MTA will seek to determine the prospects' strategic vision, technological and marketing capabilities, and lastly, qualify their interest in the Company on a high level without disclosure of the identity of the Company. Based on the prospects signing a non-disclosure agreement, MTA will deliver them an Information Memorandum. Upon the prospects' review of the document, MTA will answer questions and further qualify levels of interest. On a case by case basis, direct contact between (CEO?) and the prospects might be appropriate, especially with regard to detailed questions enabling the prospects to better evaluate a potential strategic fit. The level of information to be disseminated at this stage will be managed carefully.
6) Visitations - MTA will determine with (CEO?) the criteria, extent and timing of visits with respect to maximizing the value of visitations and minimizing any adverse impact of such visits on a client's staff. Prior to arranging on-site visits, MTA will receive oral confirmation and acceptance of the Company's price expectation, or an alternative offer range based on defined "subject to's". MTA will determine with (CEO?) which companies should be invited to visit. On-site visits will be arranged. Follow-up information will be provided to those potential strategic partners with whom the Company wishes to proceed. Any reciprocal visits will be arranged.
7) Bid Process - Depending on the nature of discussions and relationships being built with the most likely strategic partners, MTA may advise that a formal bid process be implemented and establish a date for receipt of letters of intent. If a less formal approach is selected, MTA will serve as the intermediary to negotiate the terms of an agreement to be documented in a letter of intent. Once the letter of intent is agreed and signed the due diligence process will be determined and organized.
8) Due Diligence - Ground rules for the closing process including due diligence will be established. These will include protocol, participants, location, and time allowed. MTA will oversee the process and serve as the conduit between the parties to facilitate the timely and appropriate transmittal of information and documentation. MTA will manage the necessary interactions between the transaction teams.
9) Documentation and Closing - MTA will review all transaction documentation and will work closely with counsel to achieve the optimum transaction terms. MTA assistance here will extend to any employment, non-compete, and other ancillary agreements.
Projected Timeline
Weeks Begin Task Complete Task Continue Task
1-3 Presale Review Presale Review
Valuation Analysis
Approved List
Information Memorandum
4 Initial Contacts* Valuation Analysis Information Memo.
Approved List
5 Information Memo
5-8 Initial Contacts Initial Contacts
6-16 Visitations, Pre-visit Discussions
17-20 Bid Process Bid Process
21-25 Due Diligence Due Diligence
Agreements & Closing Agreements & Closing
* Initial contacts may be moved up based on the pace of completion of tasks begun in weeks 1-3 and certain prospective acquirers, which MTA and(CEO?) may wish to approach earlier than anticipated by the timeline.
With an anticipated start date of _______, this timeline represents a best-case scenario in which all parties are available when needed. Business realities may cause unanticipated delays.
The proposed timeline is based on our experience of managing and completing multiple transactions. While normal slippage has been taken into account, each transaction is affected by a unique set of transaction variables. As such, we will do our best, as indicated by this planner, to initiate and manage a focused and structured approach, which will compel adherence to the proposed timeline by all parties toward a successful completed transaction.
