How to pursue...
Mergers and Acquisitions
 Alternatives
to M&A
Acquiring
without Cash
Targeting
the Right Candidates
After
the Acquisition
M&A
Client Profiles
If you
want to sell your existing company, click here
CEO: Should I pursue a merger & acquisition (M&A)?
Knoke: Companies
grow in two ways: internal
operations and by acquisition. When
mature resources are needed right away, acquisitions make sense.
Despite our current economic downturn, longer term trends show our economy is
more fluid than before; our emerging structural
“technopace” will make mergers more commonplace than ever.
CEO: Should I do a joint venture or an acquisition?
Knoke: The first
step is to assess why the added resources are needed.
Is it to broaden the product line to reach a critical mass?
Is it to gain access to new customers?
Is it the brand name we want? Is
it to gain access to strategic technology?
Then we ask, is there a way to do this without an acquisition?
Many companies forget that joint ventures or contractual liaisons are
more flexible than acquit ions. Mergers
are ideal when the need is long term, or when operations have to be tightly
integrated at many levels.
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CEO: I’m not sure I can afford an acquisition.
Knoke:
That may be,
but if there is a strategic fit, can you afford not to acquire?
If you don’t have the cash, we might be able to do a private
placement or a leveraged buyout. Sometimes,
you can buy a company without cash by using your own stock.
Another possibility is to do a reverse merger, where the other company
acquires you. If there is a
strategic logic to putting two companies together, lack of cash should not be a
barrier.
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CEO: If an acquisition makes strategic sense, whom should we
target?
Knoke:
Once we know
whom we want to acquire, the next step is to decide the scope.
What size company are we looking for?
What geographical aspects? What
company culture do we want? What
financial resources should the target have?
In general, what specific resources – at a very detailed level – are
we looking for?
CEO:
How do you narrow down your search?
Knoke:
Ironically,
the more narrowly we define our objectives, the easier it will be to define whom
to approach. We can assist you or
your agent (investment banker) locating likely M&A candidates with several in-house databases. Using our selection criteria, we whittle the list down to a
workable number of candidates. Then
we look at each of these under a microscope before your team approaches them.
CEO: But don’t you prepare a document to show them?
Knoke:
No deal,
however introduced or whatever the merits, will receive proper consideration
without an appropriate "Black Book".
High-level mergers require appropriate documentation for the various
corporate officers, accountants, attorneys, and technical experts to be of the
same mind without unnecessary time delays or misunderstandings.
We
have been told our Black Books are among the best in the industry.
For M&A work, they are usually modular to allow us to adapt them to
the special characteristics of each candidate we approach, and to provide
information on an “as need to know” basis, to avoid untimely confidential
disclosures. Your investment banker may also prefer to use our output as
their input, taking major pieces to conform to their particular standards.
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CEO: Are you done when the candidate says "yes"?
Knoke:
We will be
available to you through final negotiations. After
the acquisition, there are issues of the merger itself where the two entities
are blended together to realize their synergies, without destroying the essence
of what made each company great. As
you grow, since we are familiar with your Company, we can help you with a
Private Placement of equity, or even your
Initial Public Offering (IPO).
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