This is a very sophisticated approach that typically yields acquisition prices considerably lower than acquiring a company that is formally represented as being for sale and on the market. Other important issues are proper capitalization, financing and determining what direction the company will take after the transfer of ownership.
We can advise our client in all these matters. Following is an outline showing the services offered.
Phase I – Preparation
- In conjunction with client, identify specific parameters of target companies.
- Commence search of target companies that are not on the market nor are represented.
- Discuss results of target company search with client.
- If necessary, conduct revised search(es) for client.
- If necessary, review revised search(es) with client.
- Contact target companies to explain strategic advantages in a possible acquisition, partnership, or joint venture with a client we represent.
- Prepare and sign bilateral non-disclosure and confidentiality agreements with target companies.
- Discuss concepts (not deal points) and determine which target companies are most motivated (in terms of price, terms, etc.) and able to close a merger transaction.
- Obtain general financial and operational information from target companies.
- Discuss financial and operational information on target companies with client.
- If requested, prepare financial valuation on target company for client only.
- Complete and deliver company valuation to client only (if required).
- Discuss strategic and synergistic options with client.
- Develop, with target companies assistance, a financial model (including pro-formas, recast earnings, projections, etc.) to be used as stand alone projections.
- Review pro-formas on target company and assist client in recreating projections under a merger scenario.
- Discuss wants and needs of target company in agreeing to an acquisition and present this information to client.
Phase II – Closing the Tax Related Buyer/Seller Gap
If the proposed transaction is an asset purchase of a C-Corp, compare book value of assets with possible asset purchase price and initiate review of tax liability on corporate gain to seller and a simultaneous stock sale to financial partner to eliminate state and federal corporate tax on sale of assets. If the proposed transaction is a stock purchase assist both parties in bridging the contingent liability gap through representation and warranty insurance solutions.
Phase III – Negotiation
- Prepare non-binding letters of intent for client on target company.
- Present non-binding letters of intent to target company.
- Discuss concepts, advantages and options with target company.
- Direct target company in appropriate response to proposed transaction.
- Assist client in negotiating letter of intent deal points with the target company.
- Finalize and obtain signatures on offer to purchase.
Phase IV – Final Documentation and Closing
- Assist the client in communications with the target company in the final due diligence process.
- Assist the client and its legal counsel to negotiate final terms of purchase agreement and affect a closing.
- If appropriate, close third party stock sale of Companies stock to eliminate corporate tax prior to dispersing acquired company proceeds of sale to owners.