Preparing for an M&A event, whether an acquisition, sale, recap or spin-off can be a road filled
with costly hazards. In many instances, the preparation and culmination of this process can
span two to three years, sapping your valuable management resources. The potential buyers
on the other side of the table have completed dozens of transactions, and this is your first
deal. How can you properly prepare and avoid costly mistakes?
Are You Ready?
Here are a few of the major tasks companies face they prepare for a transaction:
- Preparation of audited financial statements from a reputable accounting firm for at least two years
- Identification and monitoring of your key performance indicators (‘KPIs”) – a key focus of potential buyers
- Development of economic models of your business to forecast the cash flows and capital requirements over the next three to five years tied to overall industry trends, including income statements, balance sheets and statements of cash flows
- Appropriate level of internal controls to reduce the perceived risk of the buyer
- Do you have too much customer or vendor concentration and need to diversify either of these critical areas?
- Population of an virtual data room to include detailed financial data and legal information such as corporate formation documents, leases and contracts
- Engagement of investment bankers, attorneys and other advisors to assist with the due diligence and closing
- Preparation of accurate and timely monthly financial packages
- Installation of efficient internal accounting software and systems with proven internal controls
- Hiring and training of competent internal finance and accounting staff