M&A Monday: Chapter 2: Timeline of an Acquisition (Part 2)

Part 1 covered steps (1) Search Phase; (2) LOI submission; and (3) Post-LOI to purchase agreement signing.

Part 2 will cover steps: (4) purchase agreement signing to closing; and (5) Post-Closing.

4. Signing of Purchase Agreement to Closing. After the purchase agreement is signed you will breathe a big sigh of relief.

Your relationship with the seller will now change from oppositional to collaborative. This is always beautiful to see. Suddenly, all of the terms are agreed to, so there buyer and seller can work together to get to closing.

During this time, buyer should pursue and finalize equity and debt sources. This is when you send out investor term sheets and negotiate an operating agreement/shareholders agreement. Also, work with seller to obtain third-party consents, meet with employees to finalize offer letters, conduct customer calls, have transition planning meetings, and finalize any other open diligence items.

Once all the Closing Conditions are met, buyer and seller will set a closing date (usually a few days after the closing conditions are met or when lender determines).

Since the purchase agreement is already signed, the only documents to sign are the ancillary agreements (which were already agreed upon), and the equity and debt documents). All documents are signed and held by the lawyers “in escrow” (just held by the lawyer until everyone agrees to release them). Then, we usually all get on a closing call or get together in person to ceremoniously release the documents and activate wire transfers.

5. Post-Closing. At this point, all the exhaustion you felt at the end of the M&A process will dissipate (I promise). After celebratory closing dinners and a good night’s sleep you will get to work. Depending on your transition strategy, sometimes the step will be an introduction to the employees. Sometimes, the transition will be more stealthy.

Press releases should be carefully coordinated. If you want a press release, that should be coordinated with the seller (don’t forget to include your favorite lawyer in your press release). If you do not want a press release make sure everyone knows that (i.e., seller’s broker often automatically publishes one).

This will be a challenging year. You will likely find all sorts of skeletons falling out of the closet. There will be crisis after crisis and sleepless nights. A Sponsor recently told me, “I slept on the factory floor for the first 6 months and didn’t sleep properly for a year.”

M&A is not for the faint of heart. If you have what it takes to get through the challenges of an M&A process, you also have the skills to solve post-closing challenges.

I hope this overview was helpful. There are lots of misconceptions about the M&A process. If you can signal to the seller that you are clear on the process, it will help set you aside as a professional who will successfully shepherd the transaction to closing.