Middle Market M & A

Middle Market M & A

Handbook for Advisors, Investors, and Business Owners

Nall, Michael R.; Blees, Christian W.; Marks, Kenneth H.; Stewart, Thomas A.

John Wiley & Sons Inc

09/2022

496

Dura

Inglês

9781119828105

15 a 20 dias

866

Descrição não disponível.
Preface xxiii

Acknowledgments xxix

Part One Middle Market Overview 1

Chapter 1 The Middle Market 3

Performance and Impact 4

Definition 5

Characteristics of Middle Market Companies 7

Ownership 7

Access to and Use of Capital 8

Organization 8

Chapter 2 Private Capital Markets 11

Segmented Markets 12

How Market Players View Risk 17

Capital Providers 17

Owners' and Managers' Views of Risk/Return 18

Buyers 20

Market Activity 26

Chapter 3 Valuation Perspectives for the Private Markets 31

Private Business Valuation Can Be Viewed Through Different Standards of Value 32

Market Value 34

Investment Value 37

Fair Market Value 37

Fair Value 37

Incremental Business Value 38

Owner Value 38

LBO Value 39

Collateral Value 39

Book Value 39

Valuing Intangibles 39

Why the Different Versions of Value? 41

Valuation as a Range Concept 42

Value Worlds and Deals 43

Part Two For the Business Owner/Operator and Entrepreneur 45

Chapter 4 Transition, Succession, and Exit Planning 47

A Decision Framework 49

1. Owner Ambitions and Goals 50

2. Industry Cycle 51

3. Business Cycle 52

4. Company Foundation 53

A Team Approach 53

Chapter 5 Value Growth and Optimization 55

Increasing the Return on Invested Capital 57

Strategic Position 58

Customer Base 59

Cost Structure and Scalability 60

Working Capital 60

Human Capital 61

Reducing the Risk of Investment 62

Awareness and Planning 63

Growth Plans and Relative Position 63

Leadership Team 63

Predictability of Revenues and Earnings 65

Concentrations 65

Compliance 66

Keeping Current 67

Ease the Transfer of Ownership 67

Financial Information 68

Contracts 69

Title to Assets 69

Corporate Structure and Attributes 70

Don't Lose Focus on the Core Business 70

Summary 71

Formula Definitions 72

Part Three The M&A Practice and Processes 75

Chapter 6 Practice Management 77

Primary M&A Advisors 78

Marketing the M&A Practice 80

Target Audience 80

Networking 81

Marketing and Advertising 81

Pretransaction Consulting 82

Valuation Services 82

Other Consulting Services 82

Becoming an Expert 82

Client Acceptance 83

Confidentiality 84

Client Engagement 84

Identification of the Parties 85

Scope of Service 85

Limitations and Disclosures 86

Fees- Selling Advisor 86

Example Fee Structures 88

Termination and Tail 89

Buy-Side Engagements 89

Licensure Issues in the M&A Business 90

Chapter 7 Sell-Side Representation and Process 93

Selling Process Overview 93

Step 1: Preliminary Discussions with Seller 94

What Is the Transaction? 95

Value Expectations 95

Process 96

Step 2: Data Collection 97

Step 3: Industry Research and Identifying Buyers 100

Research Market Buyers 101

Step 4: The Marketing Book 101

Preparation 103

Seller Motivation 104

Financial Disclosures 105

Specific EBITDA Presentations 105

Balance Sheet Presentation 105

Other Financial Disclosures 106

Prospective Financial Presentation 106

Step 5: Marketing Process 106

Clear the List with the Seller 107

Initiate Contact with Buyers 107

Obtain Nondisclosure Agreements 108

Distribute the Book 108

Follow Up, Discuss, and Set Expectations 108

Step 6: The Auction Dynamic and Negotiations 109

Negotiated Sale 109

Private Auction 111

Public Auction 112

Step 7: Buyer Interest and Transaction Structure 113

Term Sheets 114

Indication of Interest (IOI) 114

Letters of Intent 114

Deal Structure 116

Asset versus Stock Structure 116

Other Tax Deferral Techniques 117

Step 8: Due Diligence 120

Step 9: Definitive Agreements 121

Step 10: Closing Process 122

Price and Valuation Changes 123

Terms and Conditions Changes 123

Third-Party Challenges 123

Allocation of Risk 124

Other Preclosing Mistakes 124

Postsale Integration 124

Chapter 8 Corporate Development and the Buy-Side Process 127

Why Acquire? 129

The Dismal Ds 130

Alternatives 131

The Acquisition Process 132

The Pipeline and Filter 133

Approaching the Target 134

The Balance between a Deep Dive and Locking In the Deal 135

Lower-Middle Market versus Middle Market Deals 136

Valuation from a Strategic's Perspective 137

Structuring the Transaction 140

The Bid 141

Due Diligence 141

Integration 144

Practical Tips and What Causes Deals to Fail 146

What Should We Acquire? 146

Why Are We Doing This? 147

Alignment of Interests 147

Recruit the Right Advisors Early 148

Allocate Enough Resources 148

Every Interaction Is a Negotiation 149

If It Can Go Wrong, It Will Go Wrong 149

Chapter 9 Buy-Side Representation 151

Buyer Clients 151

Strategy 152

The Filter 153

Financing 154

Quality of Earnings 154

Coordination 156

Integration 156

Chapter 10 Technology in the M&A Process 157

Virtual Data Room 158

Market Insight and Data 159

Deal Sourcing and Exchanges 162

Due Diligence Software 163

Project Management Software 164

Comprehensive M&A Software 164

Supporting Tools 165

Artificial Intelligence and Technology Trends 165

Technology Providers 167

Chapter 11 Professional Standards and Ethics 169

Holistic Advice 171

Ethical and Professional Standards 172

Competence and Professionalism (Reputation) 173

Best Practices (Activities) 173

Ethics (Behavioral Boundaries) 174

The Middle Market Standard 175

Part Four M&A Technical Discussions 177

Chapter 12 Financial Analysis 179

Financial Reporting Motivation 179

Ebitda 181

Balance Sheet Analysis 184

Working Capital 185

Normalization 190

Chapter 13 Market Valuation 195

Reasons for Appraisal 196

Determine the Value Subworld 196

Calculate the Benefit Stream 197

Synergies 203

Determine Private Return Expectation 205

Specific Investor Return 206

General Acquisition Selling Multiples 207

Derive Value 208

Chapter 14 Deal Structure 213

Structural Priorities 213

Business and Economic Terms 214

Tax Structure 218

Legal Structure 222

Mergers 224

Initial Analysis of Both Entities 224

Strategic Rationale 225

Valuation Modeling 225

Understanding Cost, Operational, and Cultural Differences 226

Developing the Integration Plan 227

Deal Structure and Negotiations 227

Chapter 15 Financing Sources and Capital Structure 229

Perspective 229

Financing Primer 230

Capital Structure 230

Factors Shaping the Capital Structure 234

Basic Deals 237

Buyouts 237

Recapitalizations 242

Acquisitions 243

Sources and Types of Funding 245

Debt 246

Private Equity 249

Personal Guarantees 250

Chapter 16 Due Diligence 255

Due Diligence Process 256

The Diligence Team 256

Traditional Due Diligence 257

Financial Matters 258

Quality of Earnings Analysis 258

Balance Sheet Analysis 260

Ratio Analysis 260

Other Risks 261

Audited Financial Statements 261

GAAP Compliance 262

Tax Structuring and Compliance 262

Compensation and Benefits 263

Legal 264

Technical Due Diligence 266

Business Due Diligence 267

Chapter 17 Tax Provisions Used in M&A 271

Tax Fundamentals 272

Transaction Tax Basics 275

Asset Transactions 275

Stock Transactions 277

Stock versus Asset Sale Example 278

Asset Transaction Details 280

Buyer Tax Issues 285

Detailed Tax Structuring 287

Installment Sales 287

Risk of Forfeiture 288

Assets That Qualify for Installment Treatment 288

Installment Planning Opportunity 289

Partnership M&A 289

General Partnership Doctrine 290

Partnership versus S Corporation 290

Partnership Gain Tracking Rules 292

Purchase Price Allocation for Partnership Buyers 293

Corporate M&A Issues 293

Contributions to Corporations 294

Stock/Asset Sale Election: Section 338 295

Mergers and Reorganizations 296

S Corporation Issues 300

Tax Glossary and Reference 302

Chapter 18 Legal Documentation 309

The Attorney's Role 309

Preliminary Legal Documents 311

Nondisclosure and Confidentiality Agreement 311

Letter of Intent 312

Acquisition Agreements 316

Structure of the Deal 316

Stock Sale/Merger 316

Asset Purchase 317

Representations and Warranties 318

Qualifications to Representations and Warranties 319

Indemnification 320

Transaction Statistics 321

Consulting and Employment Agreements 322

Regulatory Compliance 322

Chapter 19 Regulation and Compliance 323

Protecting Investors: Securities Act of 1933 324

Exemptions under the 33 Act 326

Commonly Used Private Placement Exemptions 327

Keeping The Markets Honest: Securities Exchange Act of 1934 329

Requirements and Rules 329

Williams Act 330

Antitrust Issues and Laws You May Encounter in the Deal 331

Hart-Scott-Rodino Act 332

Transactions Involving Foreign Investors, Foreign Trade, and National Defense Matters 333

Other Regulatory Issues and Laws You May Encounter in the Deal 334

Bulk Sales Laws 334

The WARN Act 335

The Investment Banker's Perspective 336

SEC Provisions Regulating Broker-Dealers 336

M&A Brokers No-Action Letter 338

Finders 344

Investment Advisers Act and Investment Company Act of 1940 345

FINRA Provisions for Broker-Dealers 347

The Company's Perspective 350

Process of Issuing, Selling, or Exchanging Securities for a Deal 351

State Blue-Sky Laws 354

Considerations for Public Companies 355

Chapter 20 Cross-Border Considerations 359

Is Cross-Border M&A the Right Move? 360

Culture 361

Country Risk 365

Financial Risk 365

Market and Operational Risks 367

The Legal Environment 367

Labor and Employment 370

Negotiations 371

Due Diligence 372

Integration 372

Summary 375

Glossary 377

Notes 417

About the Authors 423

About the Contributors and Reviewers 427

Index 445
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Mergers and acquisitions; mergers & acquisitions; m and a; strategic transactions; divestitures; pre-transaction m&a; post-transaction m&a; middle-market mergers; middle-market acquisitions; mid-market m&a; mid-market mergers; mid-market acquisitions; private equity; value growth; business sale; sell my business