Sell-side process problems and solutions

INTRODUCTION

In today’s turbulent times, if you are on the sell-side of M&A then the stakes as well as the stumbling blocks couldn’t be higher and steeper. There are challenges galore and you need to have the right solutions to surmount them. Quickly resolving challenges requires deep thinking and preparation. The sell-side M&A process is challenging, but the seller’s success will be maximized when a disciplined process is followed.

Some of the more prominent challenges to the sell-side process include:

Challenge: A slow start

Putting your corporate information into a sale-ready format for an M&A deal often takes more time. It requires you to conduct third-party audit, prepare quality of earnings reports, org charts, reviews and update key contracts. Besides you need to organize all this data to ensure that all your paper work is in order across all business verticals and make it share-ready. All this can delay your time-line and scuttle your deal.

The solution for this

Conduct due diligence audit to identify and plug documentation gaps, well in advance so that you are never caught off-guard. Get external advisors to do this so that the numbers are clean, authentic, realistic and easily digestible. Check key items like lease dates, change of control terms, employee non-competes etc. Gather an keep all documents updated in a VDR so that you can send it anytime.

Challenge: A messy data room

A messy data room or a disorderly site slows down your process and puts off a potential bidder. Buyers normally review via workstreams by focusing on different function areas like real estate, HR etc. These workstreams only examine information in folders provided to them, so incorrectly categorized can lead to big misses and lapses in reviewing the potential of your business. Unclutteredness may also be interpreted as disinterest.

The solution for this:

Upgrade to VDR and lean on data room support and AI tools like auto-categorization to make your documentation look good. This will result in big payoffs as enabling buy-side workstreams to easily conduct their reviews will keep your process moving and also sharpen buyers’ appetite. Moreover, orderly documents signal professionalism that can reflect an image of you being a strong investment.

Challenge: Sharing just the right amount of Information

There are a large number of people involved in the review process of an M&A. They all need to access the sensitive information as the stakes are too high. But sharing too much information, too easily exposes you to the risk of competitor leaks and data privacy violations. On the other hand, if you divulge too less information, you risk the bidder walking away and the deal fizzling off. So, it’s imperative that you ensure that the share-ready information is appropriate and constantly monitored.

The solution for this:

With VDR and properly trained team ensure that you leverage every tool at your disposal by mastering disclosure management. Quickly setting and checking user and documents permissions are the key to access control. Besides data room analytics can add another advanced level of security.

Challenge: Ensuring maximum bidder interest

Navigating your process to elicit maximum bidder interest is mission-critical. Gauging multiple bidders’ interests is a herculean task. The questions are innumerable like did all buyers log in, which folders and documents did they review? are they looking at the right documents? what searches are they conducting and why? whose interest is waning and what can be done about it? etc. Not responding to the bidders’ questions in time puts you at risk of losing the bidder.

The solution for this:

VDR analytics sharpens your oversight and that too real-time. The increasingly sophisticated analytics quickly provide you with important clues to help facilitate bidder interest.

Challenge: Deal end hurdles

Even when you think the deal is almost done, you’ll suddenly come across tail-end hurdles that will make you realize that there is still quite a lot of work that remains to be done before the deal is finally sealed. It could be regulatory communications or even smaller deal-end hurdles like negotiating transition service agreements, divestitures etc that can take more time than earlier expected. Long term hurdles could be post-merger integrations, post-close financing, non-alignment of seller buyer expectations about achieving future performance targets or financing may drag.

The solution for this:

Prepare your team mentally that post-close activities take on an average of 5-6 weeks. Anticipate issues and be prepared to overcome them. They could be your VDR project terms, extensions, unexpected overages, if TSAs are involved then work out in advance the approximate time and budget for carve-out costs.

So, anticipate and be prepared with solutions for the sell-side process problems in advance to give your company an extra-edge on the sell-side.