November 4, 2018 at 10:25 pm #70918
I am new to the M&A universe which is why I’m taking this course, just to learn more about the process. During a recent discussion I was having at work someone asked me a question that I couldn’t answer with any sense of confidence. I’m wondering what are the primary concerns for the executives of a target company during due diligence period and beyond.
Looking forward to the different perspectives.December 6, 2018 at 12:06 am #73006
I opine the top concern is their future employment. With M&A the target executives often feel second-best, for they were bought. As well lack of knowledge of what is happening can lead to concern and even to behaviour that can jeopardize value. As such communication and openness is key to success.January 3, 2019 at 10:35 am #74585
In my opinion the role of management is always to maximise long term shareholder value. This is what should be at the forefront of the thinking constantly. In the way they run the company and even in the way they sell the company.
If an acquirer comes along with a proposal to buy the company its important that the management can well judge the likelihood of a transaction be consummated, this is critical as otherwise the target may spend fees on a transaction that will never happen and end up giving away some of their private information. In other to prevent the target’s time being wasted and to disincentivise not completing the transaction, the targets management can suggest a break up fee early in discussions.
If the acquirer is serious about the deal then the management of the target should be interested in getting the best deal possible for the company, whether than be in shares or cash.
Depending on the acquirer (private equity firm, competitor, strategic buyer) an acquisition may be an interesting and exciting time for a target company!
Happy to answer any question if you have any.
SeunMarch 25, 2019 at 3:09 pm #81907
According to my experience, primary concerns of the executives of the target company during due diligence and before closing are
1. keeping up the management committed to deliver business as usual results
2. retaining their employees who start understanding the company will be sold ( for the ones that are engaged to support the process of due diligence)
3. managing the extra workloadMarch 25, 2019 at 5:48 pm #81925
The theoretical top priorities of the executives of the target company should be (i) firstly providing as much information as possible during the DD process, (ii) secondly, once the operation has taken place ensure a smooth transition.
However, this theoretical approach can be left apart if their personal interests and/or ambition prevails over the interests of the shareholders. It’s quite naïve, to think that a great number of executives will act selfishly during all stages at it is usually the nature of human beings.March 29, 2019 at 4:13 am #82120
In my experience, executives tend to voice concerns mainly surrounding relationships and continuity of the company. In particular they are often concerned with (i) continuity of relationships with suppliers and key customers, (ii) continued employment of employees without loss of benefits and (iii) maximizing value to shareholders in the acquisition.April 2, 2019 at 1:52 am #82357
In my experience, its a case by case bases, but in acqusitions, usually the main concern is employees. The executives are going to get paid out or ask to come aboard, and they want to make sure there employees and teammates are going to be fine after the acquisition. This could dictated whether the company is absorbed into the the acquiring company, like American Airlines and US Airways, or will operate as separate companies, like Zappos and Amazon , where they operate as 2 different companies but owned by one.
The second concern is most likely shareholder value. They want to make sure the they get top dollar for there company. In a lot cases executives are put in place by investors to make sure that very much happens. that includes making sure revenue is grown and costs are maintained so that when an offers made they could justify there value.April 2, 2019 at 8:34 am #82380
Jeroen van der BruggeParticipant
In family-businesses I also see the need to know what happens with their company. It is a legacy thing. If you have build the organisation from scratch, and you feel that organic growth has reached its limits, you will be open to other options (like being acquired). But many feel it would be hard to see the identity of the company you build lost. So I also see that as an issue for the target company.April 17, 2019 at 9:23 am #83305
In my experience, I see their role as (a) stabilising workforce and operations during transition, (b) maximising shareholder value and (c) cooperating and collaborating to see the transaction through to completionJune 2, 2020 at 8:06 pm #110533
I feel that a top concern in any target would be 1) potential future earnings, 2) cultural fit 3) will the target increase and enhance synergies. There are a myriad of factors that executives look into, however I feel that these are 3 key tranches that relates to the biggest decisions to be made. The goal of any merger is to have a clear and succinct pathway to optimization. I feel that these buckets include those goals very well.
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