Mergers and Acquisitions

Our M&A Practice provides high value, targeted services to both buyers and sellers who are contemplating or are involved in an acquisition, sale transaction, spinoff, or merger of two or more companies. We work with company leaders to plan for, negotiate, and execute M&A transactions and provide critical expertise and judgement related to a wide range of post-closing integration and retention challenges. With years of M&A experience with both buyers and sellers, we ensure buyers get the desired value from each acquisition and sellers are fairly compensated for their business.

Reasons to Consider Acquisitions

Gain economies of scale and market share with their core business and existing product offerings. Such acquisitions occur when one company acquires another company in the same industry, working at a similar production stage. The combined entity enjoys a cost advantage and better pricing power than did the independent entities.
Add products to its product line, which enables the company to increase revenue and profit by being able to increase revenue from each of its existing customers. This type of acquisition can also occur when a buyer faces a technology change in its core business and needs to acquire a new technology/product platform in a short period of time to maintain its revenues with existing customers, and to stay competitive in its markets.
Add customers for its existing products. This type of acquisition typically occurs when an acquiring company wishes to add a new geography to its market footprint. This type of acquisition might be a domestic (home market, e.g., US) transaction or an international endeavor.

Reasons to Sell Companies

They lack the management bandwidth or capital (or both) to continue growing their company organically and don’t have the skills, interest, or access to capital to be a buyer.
They face serious competitive threats that they are unable to address with existing resources and talent. This type of acquisition is done to preserve shareholder value and generate liquidity, thereby avoiding a reduction in shareholder value that might occur if they continue the "go it alone" approach.
Their owners and/or investors desire liquidity for their ownership interests. This type of acquisition is typically done when there are outside investors in a privately held company who want liquidity, or for a closely held (e.g., family-owned) company without a feasible succession plan.

Who We Serve

BUYERS

Buyers typically are concerned with identifying appropriate targets, initiating discussions with the targets, performing due diligence, determining an appropriate valuation, securing financing, deal structuring and negotiation, and post-acquisition integration. Our partners help focus the efforts at each stage of the process and “burn the midnight oil” as the process unfolds to ensure a successful conclusion. Because we’ve seen successful and unsuccessful acquisitions and we are not commission-based investment bankers, we provide a “reality check” at each stage of the process: to help management determine whether or not to proceed and to adjust the valuation based on due diligence. In our experience, some of the best mid-market acquisitions are acquisitions not made, or ones witha final valuation different than originally anticipated.

SELLERS

Sellers typically are concerned with positioning the company for sale, articulating both the financial and strategic value of the company to potential buyers, identifying and marketing the company to appropriate targets, initiating discussions with the targets, building out a comprehensive “data room” so buyers can conduct due diligence, deal structuring and negotiation, and post-acquisition integration. As we work with buyers, we provide a “reality check” at each stage of the process – to help management and owners determine whether or not to proceed. We also amass significant human resources to address the “peak demands” for documentation, analysis, or negotiation that are often associated with acquisitions.

Capabilities

Services for Buyers

We:

Collaborate with management and ownership to develop an acquisition strategy aligned with their growth objectives and with the corporate vision
Assist management and ownership to identify suitable acquisition targets
Collaborate with management and investment bankers (if they are being utilized) to engage with chosen acquisition targets to determine initial fit, financially, culturally, and technologically
Develop due diligence approaches, due diligence checklists (for sellers to fulfill) and assess the due diligence materials in the context of acquisition viability and intended valuation
Write due diligence reports for review by management and ownership
Advise management and ownership with respect to initial deal terms, participate in negotiations as relates to Term Sheets, Definitive Merger Documents, and Retention Agreements
Advise management and ownership on deal financing options, engage with lenders or other sources of financing when requested, and assist management and ownership in the negotiation of loan terms
Collaborate with management and ownership to develop a written integration plan that ultimately is shared with appropriate managers at both the buyer and seller companies
Assist management and ownership in developing pro forma financial projections for the first 3 years following the acquisition, including synergies expected to be realized
Identify key executives and managers at the selling company who should be asked to sign employment agreements and non-competition agreements, and develop compensation arrangements to encourage retention after the acquisition is consummated
Advise management and ownership as relates to post acquisition organization structure, identifying organizations that can be combined/optimized and organizations that should stay separate.

Services for Sellers

We:

Assist management and ownership to identify suitable acquisition targets
Collaborate with management and ownership to develop a one-page (“teaser”) description of the company’s business and a long-form company presentation deck (aka “Confidential Information Memorandum – CIM”) which describes the company’s markets, product, and business in detail, presents the company’s strengths, weaknesses, opportunities and threats (SWOT) analysis, highlights the management team capability, and describes the company’s forward product and business strategy and financial projections
Develop for review and discussion with management a valuation model to use in negotiations with buyers which includes financial elements (e.g., DCF), but which also includes comparables analysis and strategic intangibles that a buyer would receive form acquiring the company
Assist management and ownership in populating a comprehensive data room for due diligence purposes, and in anticipating the due diligence requests from prospective buyers.
Assist management in reviewing the past three years’ financial statements for accuracy, and in the “recasting” of financial statements if necessary (typically applicable to closely held or family owned businesses)
Advise management and ownership with respect to initial deal terms, participate in negotiations with buyers as relates to Term Sheets and Definitive Merger Documents
Advise management on identifying the employees that are critical for retention post-acquisition, and develop retention plans to encourage their continued employment post-acquisition

For both buyers and sellers, we perform Quality of Earnings (QE) studies and analyses.

Examples of our Work/Experience

Advising Sellers:

For www.thedetectiongroup.com (acquisition publicly announced December 2020), a 2GO partner initiated discussions with a strategic buyer (www.watts.com, a $2B revenue publicly traded company – NYSE:WATTS) and achieved “first order” conceptual agreement on the merits of an acquisition, engaging with Watts’ Executive Vice President of Corporate Development. The 2GO partner actively participated in all due diligence discussions and contract negotiations, prepared forward financial projections, negotiated employee retention agreements, and participated in integration discussions for post-acquisition. The final sales price ($9M, paid cash) was 50% greater than the original offer.

For www.interop.com, a 2GO partner led all acquisition discussions and negotiations which resulted in a $23M acquisition by Ziff Davis Publishing Company (publicly announced December 1990), a $700M revenue privately held company. The acquisition included employee retention and forward bonus agreements, and deferred payments tied to the financial performance of the acquired company for five years following the acquisition. Six years after the acquisition, the buyer “resold” the company (and two smaller companies subsequently acquired) for $200M to Japan’s Softbank Group.

Advising Buyers:

For Macrovision Corporation (now TIVO) a 2GO partner led negotiations on a $200M acquisition of an electronic software licensing company (Globetrotter Software, Inc. – publicly announced March, 2000) with 125 employees across the US and in Europe. The 2GO partner personally conducted due diligence (including customer interviews) and worked with the seller’s owners and management team to produce a pro forma 5-year financial projection. The 2GO partner participate in all merger agreement negotiations and also negotiated the acquisition of the sellers’ European distributor (20 employees, $5M total revenue) for an additional $20M so that a single worldwide organization resulted post acquisition. The acquiror was a Nasdaq publicly traded company with a $2B market capitalization and was required to get shareholder approval and Hart Scott Rodino clearance from the US Federal Government.

PRACTICE LEADERS

Joe Markunas

Glen Terry