MERGERS AND ACQUISITIONS Closing the Deal Presented to: Phoenix CEO CFO Group September 24, 2012 37 Offices in 18 Countries
Key Drivers in 2012 • Pent up demand for M&A following slow years in 2008-2010 • Improved financials • Attractive valuations • The return of private equity • Healthier balance sheets and access to stronger credit markets • Uncertainty on future tax rates • Volatility in Europe and China continue to dampen M&A activity 2
Everyone is playing… • Strategic Buyers • Scale is Critical Synergy • Buyout Firms • Financial Buyers Consolidators • Hedge Funds • Derivative Acquisitions Aggressive Individuals 3
Financial Buyers • Acquire a Platform • Grow or Consolidate • Recapitalize, Sell or Take Public 4
Strategic Buyers • The hunt for growth • Technology • Hard Assets • Channels • Market Share • Need for broader geographic coverage and global competitiveness 5
First Steps • Resisting the trap of responding to a single offer • Advantages of running a competitive bid process • Assemble deal team Investment bank Law firm Generalists are not a neutral factor, they are actually in impediment 6
Deal Process • Confidentiality/ NDA • Letter Of Intent • Due Diligence • Negotiation of Purchase Agreement • Signing of Purchase Agreement • Satisfaction of Closing Conditions • Closing 7
Transaction Timeline Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Phase One - Preparation Initial Meeting Due Diligence and Preparation of Marketing Materials Review of Potential Investors Finalize Potential Investors List Review Key Issues and Pricing Guidelines Finalize Marketing Materials Phase Two - Out to Market Initiate Contact with Potential Investors Negotiate Confidentiality Agreements Deliver Marketing Information to Potential Investors Prepare Mgmt. Presentation, Data Room and Contract Review Bidding Procedures with Potential Investors Phase Three - Solicit Bids Receive Indications of Interest Present Evaluation of Initial Proposals to Company Finalize Presentation and Data Room Management Presentations and Due Diligence Phase Four - Negotiate Offers/Execute LOI Receive Final Proposals Select and Execute Exclusive LOI Complete Final Diligence with Exclusive Party Phase Five - Close Deal Negotiate and Finalize Definitive Agreement Circulate Funds Flow, Certificates & Opinions Close 8
Buyer’s Objectives • What are the Buyer’s Objectives Buyer’s Main Objectives – Getting what they’re paying for – Risk allocation – Deal protection – Post-closing continuity of operations 9
Seller’s Objectives • What are the Seller’s Objectives Seller’s Main Objectives – Risk allocation – Certainty of closing 10
Valuation Gaps • Post-recession valuation gaps Earn-outs – Purchase price based on future performance – Operating covenants Seller’s notes – Improved financing terms to mitigate risk 11
Preparing for the sale • Prepare ahead of time With your Management team & Owners at least 12 months With your Advisors 3-6 months • Resolve any disputes before going to market • All documentation Business / Technical / IP, Legal, Accounting, Regulatory, Other Special Events • Historical Financial scrubbed, ideally audited Key financial and customer metrics readily available Documentation for all “addbacks” and other key numbers • Defensible projections Next 5 years Next 5 months 12
Preparing for the sale • Prepare your “Story” Explain the last two years Challenges, how they were solved, why the Company is stronger Growth opportunities / future value drivers • Prepare responses to likely investor questions regarding: Your Company – Business model, strategy, operating details – Customers / target market – Industry / regulatory environment – Competitors / your competitive advantage Your goals – be prepared to – Maximize Total Value, versus up front value – Sell a piece, not 100% – Keep your job – Sustain culture & employees – Find a buyer who can “take it to the next level” 13
Preparing for the sale • Prepare in advance 80% of the work is complete before you even go to market • “Dress up” your asset; prepare for a sale “everyday” • Have your team in place, informed, sharing similar goals • Create competition to maximize valuation/terms and ensure closure • Have good advisors with strong experience and great references 14
Serving Global Markets Squire Sanders is one of the most geographically diverse legal practices in the world; our global breadth and local depth serve our clients across the globe. “One-Firm Firm” Philosophy” • Asia Pacific: 6 offices, ~115 lawyers We operate collaboratively throughout the world providing seamless legal • Europe / Middle East: 15 offices, ~650 lawyers services across all offices and practices. We act on this philosophy every day worldwide, and the results • Latin America: 2 offices, ~15 lawyers benefit our clients. Squire Sanders Legal Counsel Worldwide Network • United States: 14 offices, ~525 lawyers • Nine independent network firms 15
Jae Park Senior Associate Phoenix Los Angeles T +1 602 528 4181 T+1 213 624 2500 jae.park@squiresanders.com Practice Focus Jae W. Park has experience in a wide variety of business transactional • Corporate matters, with a focus on mergers and acquisitions, private equity, Transactions, venture capital, corporate governance, corporate law and general Finance & business matters. Governance • Mergers & Jae’s M&A experience includes advising public and private companies Acquisition Education regarding the structure and implementation of joint ventures and • Duke strategic alliances. Jae also represents private equity firms in public and University, J.D. private leveraged buyout transactions. He also counsels clients on post- • Princeton transaction matters and has experience advising clients on securities University, B.A. matters. Admissions • Arizona • California • New York 16
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