Getting Your Sell-Side Deal Done – Documentation

Part 1: Preparation & Documentation

In a sell side process various steps must be taken in order to successfully sign and close an M&A transaction. Creating marketing materials such as blind profiles or anonymous teasers (that often do not have to be anonymous, depending on the readers knowledge or purpose) as well as confidential information memoranda is a task well known to the M&A Analyst. However, to create such materials thorough preparation and a comprehensive understanding of the business at stake is essential and key to market a company and to eventually get your deal done. Especially for those that are new to the industry or want to start out in M&A, it can sometimes be a bit difficult to gain insights and a solid idea of the individual steps of a sell side process in closer detail. Those with some M&A experience – possibly through an internship at an investment banking division (IBD) – might know about the first steps in a sell side process in perfect detail. Find out more about how to approach potential investors and how to deal with indicative bids.

Let’s assume you did that IBD internship for two months and spent most of your time preparing pitch books, financial models and fixing the printer. Everyone is happy with your work and you get a return offer to start as an analyst next week. Pleased as you are and since that is truly what you want, you don’t think twice and immediately sign the employment contract. Now the deal maker for whom you mostly worked so far calls you and it turns out that one of those sell side pitches you worked on so hard convinced its audience and your company has been chosen as the financial advisor for the sell-side process. Having won the mandate and being staffed on a project from the beginning the first time the question arises – what’s next?

In a first step you agree on a date where your Team and you will meet your client for the Kick Off event. That is probably the first time when you see the company’s premises. The Kick Off starts with a short introduction of all project members, both your team’s and your client’s team. Following this, the time line of the project will be presented and agreed upon with your client. Of course, you presented this already in your super pitch but surprisingly it turned out that something had changed, and you had to rerack and tweak that time line again knowing that this was maybe not the last time. In the timeline or project schedule you will give an overview of deadlines and the various steps in creating the Information Memorandum (IM), selection process of potential investors, dates for the approach of those investors, indicative bids, building up a virtual data room, binding bids and of course signing and closing.

Kick Off Event and Understanding the Business

To bring in a bit of variety you leave now the meeting room and visit the actual site. That is also probably the first time you’ve seen the company’s production facilities and machinery, if existing or other offices, depending on the type of business the company is in. You get a good glimpse of the general atmosphere among the workforce and in general a better understanding of the business model. After returning to the meeting room the client presents and explains to you the company’s business model, its products and services in closer detail, unique selling points, competitive environment etc. and gives you a good overview of the organisation as a whole, as well as its financial background. Of course, you took your notes in painstaking accuracy as this is very crucial for marketing materials such as the IM and its structure which will be discussed later. That is also the point where you start developing a story line that will run through your IM as a clear thread which will also bring a better structure to the ideas that you and your team already originated for the IM.

Initial Ideas for the Information Memorandum

In a next step you give an overview of your initial ideas on what the IM should contain and what it could look like. In this context you also go through a list of information you will need to finalise all marketing materials especially the IM. This can be but is not limited to general company information, company presentations, legal structure, business activities, business units, suppliers and customers, financials, marketing and personnel related information, company sites, quality management and IT systems. Finally, you will discuss the next steps with your client, agree on dates for future workshops and define responsibilities for information required to finalise the Teaser and IM. As a matter of course, all the steps mentioned above are just exemplary and can vary in sequence and in content.

Preparation for the Information Memorandum

After the Kick Off event you will start drafting or redrafting the IM based on your new insights and crunching the numbers to build up a financial model. Keen as you are as new analyst you turn all the new financial information you have gathered into all sorts of valuation models. During that time, you also will have multiple phone calls with your client discussing the status of the requested information for your IM and verifying financials and their assumptions for your financial model. As time passes, your IM will become more complete and your financial model will balance moving closer to the next step in the sell side process: Approach of Potential Investors!