Mergers and Acquisitions For Dummies (52 page)

Lawyers and accountants shouldn't attend the management meeting! The meeting is for the businesspeople to discuss business issues, which are separate from legal/accounting issues. Although very important legal and accounting issues need to be settled or determined at some time, the management meeting isn't that time. Lawyers and accountants can later memorialize what the deal people create.

Agreeing on a venue

The meeting location largely depends on the type of company. Service firms probably don't hold the meetings their offices because the offices aren't that important; they don't have manufacturing equipment and inventory that a Buyer may like to see. Instead, a service-firm Seller should utilize the office of her intermediary.

Traipsing a series of strangers through the office only tips off the employees. Most Sellers don't want employees to know the company is for sale, but employees figure out pretty quickly that the hush-hush and unannounced meetings with mysterious people probably means the company is for sale.

If Seller is a distributor or manufacturer, Buyer may want to see the facility. This desire makes sense and is a reasonable request. In this case, the meetings may be held at Seller's facility. Another option is to conduct the meetings off-site at a nearby hotel (if the intermediary's office isn't close). Seller can then take Buyer to the facility for a walk-though before returning to the hotel to continue the meeting.

As Seller, schedule a stealthy facilities tour if you're especially concerned about employees figuring out the company is for sale. Give the tour after hours or on a day the facility isn't in use.

Setting the meeting agenda

I recommend that Seller circulate a written agenda. Keep it simple: roughly five to eight items. Although specific agendas vary from deal to deal, a management meeting should generally include the following aspects:

Introductions:
The whole point is to get to know the other side, right?

Buyer's discussion:
Buyer introduces himself, talks about his company or fund, his investment strategy, and his reasons for pursuing this particular Seller.

Seller recap:
Seller provides a simple reminder of what she's seeking to do (sell 100 percent or some other amount of the company), whether she's amenable to structuring (including an earn-out, note, and so on), and whether she prefers cash at closing. If a selling owner is interested in staying on board after the sale, she should communicate that at this time as well.

Seller-owned real estate isn't part of an offering document, so if Seller is open to selling the real estate, she should mention that at this juncture.

Opportunities for the buyer:
This section represents the thesis from Seller's offering document, updated if necessary or appropriate. Listing some of Seller's key strengths — recognizable brand name, revenues, profits — isn't a bad idea.

Recent improvements or changes:
Think of this section as Seller's brag-and-tout section, where she can discuss any pertinent updates, such as new systems that have improved margins, changes in the inventory techniques, new customers, better terms with vendors, or anything that's an improvement or change from the offering document.

Financial update and forecast:
In this part of the meeting, Seller provides Buyer with updated post-offering document financials and gives guidance on future financial results. In other words, are the projections in the offering document holding firm, does Seller think the company will actually be more profitable, or is the company failing to achieve the projected results? If the company isn't achieving its projections, Seller should be able to discuss why the company's financials are falling short of plan.

Additional opportunities for Buyer:
I call this part the “roadmap to value” section. Typically, these items are post-sale opportunities for Buyer. Although convincing Buyer to pay for improvements he'll bring to the company is difficult, showing him how the benefits that may accrue after closing helps him understand that the future prospects of the company are solid. After all, if Buyer believes the future is bleak, he probably won't proceed with a transaction.