Mergers and Acquisitions For Dummies (8 page)

Don't
put on airs.
Sometimes one side is so intent on impressing the other side that it instead looks foolish, childish, and amateurish. The best course of action? Just be yourself. Don't think you need to go out of your way to impress someone. Trying to impress someone rarely works and often backfires.

If you don't know something, just say you don't know it.
You're not going to impress the other side by talking about things you don't know. If you're not sure, simply say, “I need to check into that and get back to you.”

When you say you're going to do something, follow through and do it!
No explanation needed.

Know what to tell employees — and when

Ambiguity is no one's friend. The disclosure to the outside world that a company is for sale can be a devastating bit of news. Competitors may pounce and try to steal customers by implying that the sale may impact product quality or through some other scare tactic. For this and many other reasons, news of a potential business sale should be a very closely guarded secret known to only a select few until the time is right to make the announcement.

Likewise, revealing a sale or impending sale to employees is a delicate, critical matter. The timing of such an internal announcement often depends on your situation and whether you're doing the buying or the selling. The following sections give you some insight into this important topic.

When you're selling your company

If employees find out that their employer is for sale, they may get twitchy and nervous. The news that a company is for sale can cause key people to begin looking for work elsewhere. For this reason, Sellers should tell employees about a potential sale on a strictly need-to-know basis.

Staggering the release of the business sale news is acceptable. Not everyone needs to learn the news at the same time.

For example, key executives and managers need to know before lower-level employees. Exactly who that is depends on the specifics of each company. Generally, the CFO needs to know, and depending on the size of the firm, she may need to let certain key employees in on the secret. Financial disclosure is very important, and people in the accounting department can usually figure out when something is going on — they're suddenly inundated with very unusual and exacting requests for financial data!

If an employee asks you about a rumor that the company is for sale, neither confirm nor deny the rumor, but never lie. If you tell the employee that the company is not for sale and then the company makes a sale announcement two months later, that employee will feel betrayed and her trust will be broken. Instead, tell her that the owners are exploring some options, including bringing in investors to help take the company to the next level.

When you're buying companies

For Buyers, letting employees know that the company is seeking acquisitions has little downside. Think about it: How much harm can come from your competitors finding out that your company is so successful that you're exploring making acquisitions?

Treat the confidentiality clause in the confidentiality agreement very seriously. Loose lips sink ships. A sure way to scuttle a potential deal is for Buyer to talk about it with people who aren't part of the process. See Chapter 7 for more details about confidentiality.

Considering the Costs Associated with M&A

Although the main cost in any M&A transaction is most likely the cost to acquire the company (or assets), both Buyers and Sellers incur other costs. These costs range from the retinue of advisors needed to close deals, paying off debt, adjustments made after the close, and, regrettably, taxes.

Tallying advisors' fees and other costs

As I explain in Chapter 5, M&A deal-makers can't do the job alone. Any Buyer or Seller should retain a capital M&A advisor (investment banker), a lawyer, and an accountant. These people don't work for free, so their charges are part of the expenses of doing a deal. Of course, advisor fees vary based on the deal and how much work the advisor does, but here are some very general guidelines:

A lawyer may charge anywhere from $25,000 to more than $100,000.

An accounting firm may charge anywhere from $25,000 to $75,000.

Investment banking fees vary, but in a very general sense, you should expect to pay roughly 3 percent to 10 percent of the transaction value.