Competitive auction overview

Planning Development
Develop investment case Develop business plan Select initial buyer universe Highlight transaction issues Choose the right process Create timelines/responsib ilities Set transaction structure Appoint advisors

Execution Preparation
Due diligence/data gathering (including vendor Due diligence and data room) Develop position thesis Resolve transaction issues Develop review financial forecasts Prepare Teaser/ Information Memorandum Valuation

Marketing
Due diligence/data gathering (including vendor Due diligence and data room) Develop position thesis Resolve transaction issues Develop review financial forecasts Prepare Teaser/ Information Memorandum Valuation

Negotiation
Discuss the final offers submitted Contract the negotiations (including SPA) Final due diligence Documentation Closing

Key milestones

Kick-off meeting

Documents/ Materials ready

Final offers

Summary of M&A process

Bidder selection Bidder contacts Approach all interested buyers with Teaser Bidder signs CA Bidder receives information
Memorandum and Process Letter Request first round offers Selected in comparative bid analysis

Final negotiationsa

Selected bidders receive Process Letter 2

Bidders receive Vendor due diligence and legal documents Bidders receive access to dataroom and meet management Request final bidding offer

Stage 3

No End

Yes Stage 2

Dataroom Index
1. Organization and Structure
Corporate organizational chart Board of directors meeting minutes

8.

Intellectual property
List of patents, trademarks, and copyrights Software license agreements Employment agreements/benefits Employee options details Summary of owned/leased real estate Deeds, mortgage documents, and leases List of insurance policies List of insurance claims

2.
3. 4.

Financial Information
Audited financial statements Financial model

9.
10. 11.

Management and Employee Matters

Operational Overview
Contracts and agreements Machinery and equipment leases List of current programs List of completed programs

Property Overview Insurance

Research and Development

5.
6. 7.

Suppliers
Top 10 suppliers Supplier agreements

12.

Environmental Matters
List of environmental issues Compliance certificates

Products and Markets

Top 10 competitors Market consulting reports

13.

Litigation
List of pending or threatened litigation List of judgments and settlements Charters; by-laws Governmental regulations and filings List of outstanding debt Credit agreements and indentures List of appropriate regulatory agencies List of any necessary permits

Sales and Marketing

Top 10 customers Customer agreements

14.

Legal Documentation

15.
17.

Debt

Regulation

Teaser
The teaser is a marketing document frequently used to assess the interest of the potential buyers, while allowing the seller to maintain the name of the asset confidential. The teaser includes general, mostly public information on the asset.
Summary description of the opportunity Detail of key selling points Headline operating figures May have key financials Key contact of the people managing the process While it provides enough information to the potential buyer to demonstrate its interest, the teaser allows the seller to maintain the identity of the asset confidential (if the seller wishes to do so)

The teaser is the pre-cursor to the confidentiality agreement

Confidential agreement
Before starting any disposal process the seller needs to guarantee the confidentiality of the information about the business made available to the potential buyers
Confidentiality extended to all the advisors of each potential buyer

Prior to receiving information memorandum, all interested parties must agree and return a signed confidentiality agreement
The confidentiality agreement should include stringent conditions on access to information, distribution of confidential information and communication between the potential buyers (or their advisors) and the seller, management of the target or the sellers advisors (e.g. no approach can be made to the management of the target without the sellers express consent) In addition, the confidentiality agreement should include clauses on destruction of all information provided to the potential buyers at the request of the seller or the sellers financial advisors Potential buyers to be bound by the confidentiality by the confidentiality agreement for an agreed time period Each potential buyer will have comments and changes before they sign Acceptance of proposed changes driven by the need to balance confidentiality with a desire to keep as many potential buyers involved Negotiation process to be led by financial and legal advisors

Initial draft of the confidentiality agreement to be prepared by the sellers advisors

A key feature of the agreement should be to prevent potential buyers from colluding in the process

Process letter
The letter sets out the auction process and the rules to be adhered to by all prospective buyers
Timeframe for the transaction and details of significant events Key contacts on the sellers side Information to be included in each buyers documentation

It is important to maintain an orederly auction with all participants moving at the same speed so that full evaluation of offers can be made and offers are compared to each other on equal basis
A well drafted process letter allows for maintenance of competitive auction

Follow on process letter (normally referred to as second round letter) to be sent to the bidders selected to make a binding offer
Control of process (including such matters as dataroom and SPA) by the vendors is crucial to maintain bargaining power Potential to propose management presentations/site visits Key binding offer information: definitive price, guaranteed financing for the offer, necessary corporate approvals, conditions of the offer

Information memorandum
Key commercial information sources ipon which the potential purchaers will make their offers
Substantial amount of time and effort needs to dedicated to the production of quality documents There are reputational risks associated with delivering a sub-standard information memorandum or management presentation that have not been properly verified Reliable financial information Information about the business/asset Overview of licensing arrangements (if any) Overview of key contracts (if any) A vendor due diligence is a perfect complement to these documents. The information on the vendor due diligence will be verified and will guarantee the accuracy of the data included in the information memorandum and management presentation

Selling documents, which must be accurate and balanced to retain credibility

Certain information is of paramount importance

Sample information memorandum table of contents

Executive summary Market overview Business overview Current operations Upside potential Business plan Equipment and infrastructure Human resource and IT Financials Legal considerations