Mergers & Acquisitions From A to Z

Mergers and acquisitions represent a successful growth strategy for many companies, but, while potentially profitable, M&A transactions are complex and often risky. Covering the latest trends, developments, and best practices for the post-Madoff era, this comprehensive, hands-on resource walks readers through every step of the process, offering practical advice for keeping deals on track and ensuring post-closing integration success.

Filled with case studies and war stories illustrating what works and why, the third edition of Mergers and Acquisitions from A to Z offers valuable tools, checklists, and sample documents, providing crucial guidance on: preparing for and initiating the deal; regulatory considerations; due diligence; deal structure; valuation and pricing; and financing even during turbulent market conditions.

M&A transactions can quickly spell a company’s doom if they are not conceived and executed carefully, legally, and sensibly. This is the classic guide to mergers and acquisitions, now completely updated for today’s market.

Table of Contents

ACKNOWLEDGMENTS ix

INTRODUCTION TO THE THIRD EDI T ION xi

CHAPTER 1

The Basics of Mergers and Acquisitions 1

Understanding Key Terms 1

What’s All the Fuss About? 3

Why Bad Deals Happen to Good People 8

Why Do Buyers Buy, and Why Do Sellers Sell? 9

CHAPTER 2

Preparing for the Dance: The Seller’s Perspective 13

Conducting a Thorough EOTB Analysis 17

Preparing for the Sale of the Company 17

Common Preparation Mistakes 29

Other Considerations for the Seller 31

CHAPTER 3

Initiating the Deal: The Buyer’s Perspective 34

Assembling the Team 34

Developing an Acquisition Plan 35

Applying the Criteria: How to Narrow the Field 43

Approaching a Company That Is Not for Sale 44

Dealing with the Seller’s Management Team 45

Directory of M&A Resources for Prospective Buyers (and Sellers) 46

CHAPTER 4

The Letter of Intent and Other Preliminary Matters 51

Proposed Terms 52

Binding Terms 52

Common Reasons Why Deals Die at an Early Stage 59

Preparation of the Work Schedule 60

Another Predeal Task: The Growing Debate About the Role and

Usefulness of Fairness Opinions 61

CHAPTER 5

Due Diligence 65

Best Practices in Due Diligence in the Era of Accountability 2.0 66

Legal Due Diligence 74

Business and Strategic Due Diligence 83

Conclusion 91

Appendix to Chapter 5: Post-Sarbanes-Oxley Due Diligence

Checklist 92

The Disclosure Requirements 93

Checklist of Items Post-Sarbox 97

CHAPTER 6

An Overview of Regulatory Considerations 101

Introduction 101

Environmental Laws 102

Federal Securities Laws 103

Federal Antitrust Laws 106

Waiting Periods 109

Labor and Employment Law 113

CHAPTER 7

Structuring the Deal 120

Stock vs. Asset Purchases 122

Tax and Accounting Issues Affecting the Structure of the

Transaction 126

One-Step vs. Staged Transactions 130

Method of Payment 132

Nontraditional Structures and Strategies 135

CHAPTER 8

Valuation and Pricing of the Seller’s Company 144

A Quick Introduction to Pricing 146

Valuation Overview 147

CHAPTER 9

Financing the Acquisition 155

An Overview of Financing Sources 156

Understanding the Lender’s Perspective 159

Financing Deals in Times of Turmoil 160

Steps in the Loan Process 164

Equity Financing 168

CHAPTER 10

The Purchase Agreement and Related Legal Documents 189

Case Study: GCC Acquires TCI 191

Sample Schedule of Documents to Be Exchanged at a Typical

Closing 209

CHAPTER 11

Keeping M&A Deals on Track: Managing the Deal Killers 252

Communication and Leadership 253

Diagnosing the Source of the Problem 254

Understanding the Types of Deal Killers 254

Curing the Transactional Patient 256

Maintaining Order in the M&A Process: Simple Principles for

Keeping Deals on Track 257

Conclusion 258

CHAPTER 12

Postclosing Challenges 259

A Time of Transition 260

Staffing Levels and Related Human Resources Challenges 264

Customers 267

Vendors 268

Physical Facilities 268

Problems Involving Attitudes and Corporate Culture 269

Benefit and Compensation Plans 271

Corporate Identity 272

Legal Issues 272

Minimizing the Barriers to the Transition 273

Postmerger Integration Key Lessons and Best Practices 277

Conclusion 280

CHAPTER 13

Alternatives to Mergers and Acquisitions 281

Growth Strategy Alternative 1: Joint Ventures 282

Growth Strategy Alternative 2: Franchising 287

Growth Strategy Alternative 3: Technology and Merchandise

Licensing 299

Growth Strategy Alternative 4: Distributorships and Dealerships 306

INDEX 309