This course can also be presented face to face in-house or via live in-house webinar.
M&A Training Course Objectives:
- Get to grips with the tactics for managing the advisors in the deal
- Be taught about how to manage the buyer and the sellers
- Get an overview of warranty insurance, a powerful negotiating tool
- Master the conflicts with the managers who are not the owners.
- Gain an appreciation of the general guideline for effective negotiating
- Learn about the structure of the offer, the impact on value & price
- Have explained to them how to bridge the “value gap” on price
- Be appraised of the possibilities for value leakage: reps, warranties, disclosure & indemnities
M&A Training Course Content:
General guidelines for effective negotiating
- 5 Key issues everyone should remember in negotiating M&A
- Why price isn’t everything (10 aspects affecting the value)
- The value matrix – building blocks of the price
- Reconciling price vs. value (strategy) – what to look for
- Three step approach to focus the negotiations & avoid being side-tracked
- The art of making concessions … how and why they can help
- 8 common mistakes in negotiating the deal (& how to avoid them)
Specific matters re U.S. deals
- Jurisdiction does matter (U.S. is a Federal System)
- Heads / LOI– different approaches in NY vs Delaware (good faith)
- Different approaches to Reps & Warranties
- Different approaches to Disclosure
Issues to consider with a Chinese buyers
- Government & Regulatory issues
- Cultural matters
- Start small
- Post Merger issues
Managing the buyer and the sellers
- Key differences in approach between corporate buyers and PE firms
- The “duty to negotiate in good faith”
- What it means in Europe and civil jurisdictions
- Key risk areas & how to mitigate them
- Position in the UK (it’s not a liar’s charter)
- Buying from corporate sellers
- The agency cost issue & how it affects the deal
- Who is really running the deal?
- Dealing with owner/ managers
- The psychology of buying from owner/managers
- How to overcome problems with (inexperienced) advisors/lawyers
- How to differentiate your offer … & close the deal
- Dealing with multiple sellers
- Specific problems when buying minority/majority stakes
Managing conflicts with managers (who are not the owners)
- Identifying the two major potential areas of conflict and value erosion
- Hijacking or sabotaging the deal – the 3 scenarios and strategies for managing them
- Sweetheart deals – “typical” terms
- Problem areas and how to mitigate them (in advance)
- Other strategies for handing recalcitrant management
- Managing the flow of information
- Interaction with seller liability?
- Reverse warranties & side letters – do they work?
- Tactics for minimising seller’s risk
Structuring the Offer – impact on value & price
- The basic Offer structure – cash free, debt free & working capital/net asset value adjustment
- Analysis of the five key value drivers / areas for due diligence & value
- Cash, debt, working capital, capex and EBITDA/cash run rate
- Problematic areas and how to extract value
- The “trapped cash” problem
- What is “debt”?
“Working capital” – why and how it matters
- Two different approaches to completion: Locked box vs Completion Accounts
- How they can add / destroy value
- When to use them and when to avoid them – decision tree
- Key areas for negotiation
CASE: Identifying the key aspects affecting the reconciliation from Enterprise to Equity Value; techniques for estimating average and normalised working capital
Value Leakage: Reps, Warranties, Disclosure & Indemnities
- Reps and warranties – what’s the difference & why it matters?
- Warranties – what are the main areas of risk
- Disclosure – general tactics
- Dangers of too aggressive disclosure
- Using disclosure to identify / mitigate risk
- Indemnities – caps and collars
- Tactics for limiting liability and value leakage
- Survival / time to assert claims & carve-outs
- Liability caps / baskets, de minimis & de maximis
Warranty Insurance … a powerful negotiating tool
- Rapid evolution of the market in Europe
- Seller vs buyer policies – key differences, pricing and typical terms
- Interaction with the warranties
- How buy-side policies can help the seller
- Where sell-side policies can provide leverage
Bridging the “Value Gap” on price
- Cash – how much cash is too much?
- Shares (listed)
- Use and application
- Problems areas: market price, caps & collars
- Other pitfalls & how to avoid them
- Vendor loans
- Use and application
- Pros and cons for sellers and buyers
- Contingent value rights … undervalued tool
- Stub equity – when to use it and why
- Anti-embarrassment … what is reasonable?
- Consultancy agreements – Where and how they can help
- Earn-outs – a tool for value arbitrage
- Anatomy of an earn-out
- Key negotiation issues
- Typical pitfalls for buyer
- Typical pitfalls for seller
CASE: Identifying the key issues in a tricky disposal, discussing how best to negotiate these with the other side and deriving the optimum deal structure in order to resolve the key issues to the benefit of both buyer & seller
Background of the trainer:
The trainer is a consultant, public speaker and author. He provides training programmes globally to a blue-chip client base on private equity, debt finance, loan documentation and restructuring. He is a senior consultant with Debt Xplained, with Grant Thornton UK (Debt Advisory) and is also a Senior Advisor to KPMG Finland.
He has spoken at conferences in the UK, Europe, Australasia & South Africa. He provides training to a wide range of clients on a bespoke in-house basis & publicly through Redcliffe Training Associates. Additionally, he is the Programme Director for the infrastructure/project finance module for the MBA programme at the Cass Business School in London.
M&A Training Course Summary:
This M&A Training Course programme is aimed at those with a working knowledge of the M&A process. It focuses on negotiating the key commercial aspects of the transaction which impact value for both buyer and seller and on creating the right framework and strategy for enhancing value to the seller or retaining value for the buyer.
The simplistic view of M&A is that it is a bilateral process between buyers and sellers. Experienced practitioners understand it is an organic process, which involves multilateral negotiations between buyers/sellers on the one hand, and their respective advisers on the other hand. Additionally, there are critical negotiating issues that arise, in parallel, between the parties, their own advisers and between the advisors themselves (e.g. accountants debating the completion accounts, lawyers debating warranties in the SPA).
To complicate matters, there are significant differences in approach between different types of sellers and buyers. For example corporates have a different agenda to PE firms whilst owner/managers, who invariably lack experience in M&A, often represent the biggest challenge. Last, the seller’s management can also have a malign influence on the sale process which requires delicate handling.
The M&A Training Course is divided into two parts. The first part focuses on the soft negotiating issues which are common to smaller deals but less relevant in larger auctions. The second part focuses on the technical or commercial aspects where the real value can be gained or lost. These include the completion mechanisms (completion accounts and locked box), the offer structure (e.g. cash free-debt free and working capital adjustment), structuring the consideration, handling management and value leakage through the warranties, disclosure and indemnities.
Finally, warranty insurance, long seen as an expensive and cosmetic solution, is experiencing rapid acceptance in Europe and, increasingly, has emerged as a powerful negotiating tool. Last, the programme reviews various solutions to closing the “value gap” between the parties and the pros and cons of the various methods of achieving this.
Please note that this course covers some aspects that are also covered on the Sale & Purchase Agreements course although the focus in this programme is on commercial aspects as opposed to a more legalistic approach in the SPA course.
What Redcliffe’s clients are saying about the course
“Topics covered, very dynamic presentation and lots of examples”
— Vice President – M&A, Santander
“Instructor was very knowlegable on Corporate Finance”
–Senior Associate, Chadbourne & Parke (London) LLP
“Very good course, covering every aspect of process. Well informed and experience instructor”
— Director, Rothschild & Co