Mergers and Acquisitions For Dummies (3 page)

Introduction

I
n every job — whether it be sales, managing retail establishments, raising capital, crunching numbers, writing, working with venture capitalists, creating online ventures, or working investment banking deals (I've done all these, by the way) — you quickly discover that you need a whole new set of rules, lingo, conventions, and nomenclature. And more often than not, what you need to know to excel at your job can be distilled into just a few salient points. If you're lucky, you bump into a wise old sage who, upon experiencing your questioning, utterly confused face, and dispirited body language, simply says, “Forget all that other stuff; here's what you really need to know.” Enter
Mergers & Acquisitions For Dummies,
an inside look at the process of buying and selling companies.

Although companies change hands every day, buying and selling can mean many things and take many forms. Who or what is the Buyer or Seller? What kind of transaction is it? How will the Buyer finance the deal, and what does the Seller receive? These are only a few of the considerations in any given mergers and acquisitions (M&A) deal. It's so confusing!

As a result, business owners, some of the main participants in M&A, are often completely befuddled when the time comes to sell their businesses or make acquisitions. They don't know anything about M&A because they've been focused on their own businesses and not on the business of buying and selling companies.

That's why I wrote this book — to serve as your wise old sage as you jump into the wild M&A world.

About This Book

Although the M&A process, like any sales process, involves a step-by-step approach, I've written this book so you can simply refer to whatever section you need to read. Scan the index and table of contents and then go directly to the information you need.

When a Buyer and Seller are negotiating a deal, they're on opposite sides of the table. The Buyer wants to get the best (that is, lowest) price, and the Seller wants to get the best (that is, highest) price. This book isn't slanted one way or another. It's not pro-Buyer or pro-Seller. Deals get done only when Buyer and Seller find common ground and agree to price and terms.

During the M&A process, many of the steps and techniques I discuss in this book apply to Buyers, Sellers, or both. I highly recommend Sellers read the Buyers' information and vice versa. My hope is that this book provides some insights for both sides by helping each side see things from the other's perspective. Understanding the other side's motivation and rationale is key to getting a deal done. If you know what the other side is seeking or why she's asking for something in a particular way, you're in a better position to provide an answer that helps move the deal to a close. And closing deals, ladies and gentlemen, is what M&A is all about.

Conventions Used in This Book

I use a few conventions throughout this book to help make it more accessible:

I format new words in
italic
and accompany them with definitions.

Bold text
highlights the active parts of numbered steps and signals the keywords in bulleted lists.

Web sites appear in
monofont
. In some cases, Web addresses may have broken over more than one line during the book's printing. Just type the address exactly as you see it; I haven't added any characters to mark the line break.

Because “mergers and acquisitions” is kind of an unwieldy phrase, I often use the abbreviation “M&A.” You see it in the field all the time anyway, so why not use it here?

One challenge in this book is that two distinct yet related groups of people (Buyers and Sellers) may read this title. When I use “Buyer,” I'm referring to the individual or executives in a company seeking to acquire another company. When I use “Seller,” I'm referring to the owner of a company or the owner's representatives (executives or advisors). I also use “you” to address you, dear reader, directly, even though the text in question may not apply to your specific situation. In those cases, I clearly alert you to whether I'm talking about Buyers or Sellers.

What You're Not to Read

My goal for this book was to write an easy-to-read, introductory look at the world of mergers and acquisitions. At times, however, some of the text may be a bit technical and in-depth, so turned those parts into sidebars (those shaded gray boxes) or marked them with a Technical Stuff icon. You don't need to read those parts unless you really, really, really, really want to know more.

Foolish Assumptions

I assume you bought this book for any number of reasons:

You're a business owner or executive of a middle market or lower middle market company and are interested in selling a division, subsidiary, or entire company.

You're an executive of a company and are interested in acquiring middle market or lower middle market companies.

You're a business student who is interested in discovering more about mergers and acquisitions.

You know a lot about your specific business but little or nothing about the business of buying or selling businesses.