Mergers and Acquisitions For Dummies (98 page)

Consulting Contract

Another way Buyers can provide Sellers with added dollars is by including a consulting contract in the purchase agreement. Buyers have the benefit of the Seller's advice and counsel, and Sellers get the benefit of increased deal value.

Sellers, consult with your tax advisor if a consulting contract is on the table. Pushing proceeds into a consulting agreement may result in those dollars being taxed at a higher marginal income tax rate rather than the lower capital gains rate.

Stay Bonus

If a Buyer wants a Seller to stay on board for some period of time after the deal closes, offering Seller a bonus for not leaving can be another way to bridge a valuation gap. Buyer gets the security of knowing he won't have to pay the bonus if Seller resigns early, and Seller knows she'll receive added money by simply staying put.

Buyers, consider including a clause in the agreement stipulating that you can fire the Seller for cause, such as theft, embezzlement, conviction of a felony, and so on. That way, if Seller engages in egregious behavior that harms the company, you can limit damages without having to pay out even more money to the person.

Combo Package

Be creative! Don't think of the ideas in the preceding sections as being mutually exclusive. You can offer a little more earn-out and less stock, or a larger note and a consulting agreement. You can increase the length of the earn-out term or consulting agreement. The only limit is your creativity.

If you consider these options as knobs of a stereo, you can twist the dials in unlimited ways. A creative deal-maker has unlimited ways to bridge a valuation gap.

Appendix

T
his appendix provides you with extra content to help get your M&A show on the road, including Web sites, sample M&A documents, and lists of the info you may need to gather for important M&A stages.

Online Resources

All M&A deal-makers need some extra help, so to that end I've compiled some resources, advisors, and private equity firms in this section.

Groups, associations, and networking organizations

M&A, as with most industries, has some networking and professional associations. If you're thinking about pursuing a career in M&A, I suggest acquainting yourself with the following groups:

Alliance of Merger & Acquisitions Advisors:
www.amaaonline.com

Association for Corporate Growth:
www.acg.org

Association of Professional Merger & Acquisition Advisors:
www.apmaa.com

Global M&A Network:
www.globalmanetwork.com

Institute of Mergers, Acquisitions, and Alliances:
www.imaa-institute.org

Merger Network:
www.mergernetwork.com

Virtual data rooms

M&A deal-makers today utilize online data rooms for due diligence (see Chapter 14). Here are few of the commonly used rooms:

Firmex:
www.firmex.com

Merrill Datasite:
www.datasite.com

Share Vault:
www.sharevault.com

V-Rooms:
www.v-rooms.com

Periodicals

The following sections help you satisfy your nose for news. The first section lists some good sources of M&A-specific news, while the second provides some of my favorite sources for more-general business news.

M&A periodicals

Buyouts:
www.buyoutsnews.com

The Deal:
www.thedeal.com

Deal Reporter:
www.dealreporter.com