Process - Potential exit routes M&A PROCESS NEGOTIATED SALE
TARGETED AUCTION
OPEN AUCTION
Approach 1 or 2 buyers with a view to giving exclusivity
Approach a limited number of buyers on a confidential basis
Announce the disposal to elicit expressions of interest
IPO Public listing of the company and sale of shares to broad investor group
p
[Limits disruption to the business and employees]
p
[Creates competitive tension
p
[Maximises potential to identify all bidders]
p
[Valuation upside potential through phased exit]
p
[Provides flexibility in timing and buyer selection] [Confidentiality and limited effects of a failed process]
p
Provides flexibility in timing and buyer selection: seller drives process]
p
[Creates maximum competition]
p
[No reps and warranties, only prospectus liability]
p
[Most likely to generate the highest price]
p
p
[May attract financial investors]
[Better access to financial markets] [Increased publicity can be beneficial to operations]
q
[Most likely to result in disruption to the business and employees] [Some buyers may decline to participate in a broad, public auction]
p
p
[Higher likelihood of achieving high valuation]
p
[Fast process] [Confidentiality and limited effects of a failed process]
p
q
[Certain buyers may not be identified]
q
[Competitive tension could be limited]
q
q
q
[Increased risk of failure] q
[Can become time consuming if multiple negotiations occur] [Increased possibility of leaks] [May fail to identify certain buyers]
q
q
[Confidential information is disseminated to a wide audience]
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p
q q
[Only phased exit possible] [No control premium, discount to comparable trading universe might be required]
q
[Exposure to market and share price risk]
q
[Publication and reporting requirements]
q
[Listing-related expenses]
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Process - Potential exit alternatives M&A PROCESS TRADE SALE
BUYOUT
IPO
SPIN-OFF
Sale to a strategic buyer
Sale to a financial buyer
Public listing of the company and sale of shares to broad investor group
Create a new company from an existing division through a divestiture
[Full exit] [Control premium]
p
p
[Valuation upside from synergies]
p
p p
p
q q q q
MARKET-BASED SOLUTIONS
[Full exit] [Control premium]
p
[Valuation upside potential through phased exit]
p
[Optional staple financing to provide valuation floor]
p
[No reps and warranties, only prospectus liability]
[Structuring flexibility ranging from negotiated sale to full auction process] [Potentially limited disruptions to the business and short process]
p
[Higher leverage can allow for higher valuations in good financing environment] [No anti-trust issues]
p
[Better access to financial markets]
p
[Comply with regulatory rules]
p
[Increased publicity can be beneficial to operations]
p
[Allows exit from a whole division]
[Opening of books to direct competitors provides risk]
q
[Disruptions to the business as wide auction necessary]
q
q
[Reps and warranties] [Potentially anti-trust issues]
[Market conditions] [Flow-back issues]
q
[Only phased exit possible] [No control premium, discount to comparable trading universe might be required] [Exposure to market and share price risk] [Publication and reporting requirements] [Listing-related expenses]
[Risk of cherry-picking / orphan assets]
p
p
q q
q
[Reps and warranties] [Confidentiality of process difficult to maintain] [Political and public perception can be problematic] [Typically higher return requirements by buyers]
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q
q q q
p
p
q q q q q
[Create shareholder value while taking advantage of tax laws] [Focus on core business]
[Ownership changes rapidly] [Structural selling effects (from asset managers)] [Partial information and little analysts’ coverage] [Conflicts of interest]
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Sell-side process considerations Main documentation DOCUMENT
RESPONSIBILITY
DOCUMENT
RESPONSIBILITY
Process letters
Investment Bank / Legal advisor
Data Room
Investment Bank / Legal advisor / company
Teaser / Info Memo
Investment Bank
Manage-ment pres.
Investment Bank / company
Vendor Due Diligence (VDD)
Auditors / other advisors
Share Purchase Agreement (SPA)
Legal advisor / Investment Bank
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3