Merger + Acquisition Activity by MRI Hendersonville

1. MRI Hendersonville has been asked to be a “finder or an adviser” regarding some Merger + Acquisition Transactions. This is an attempt to outline (Roadmap) the M+A Process.


2. Managing the Client Relationship and Other Ethical Issues

a. Who is the Client?

I. Sell-Side Representation
II. Buy-Side Representation


b. Addressing the Conflicts

I. Obtaining Informed Written Consents
II. Taking on a New M+A Client
III. Accepting and M+A Project for an Existing Client

c. Documenting the Engagement

I. Identification of the Client
II. Role of Counsel
III. Payment for Services
IV. Expected Role of MRI Hendersonville

d. Communication with the Client (Buy Side) and the Customer (Sell Side)

3. Forming A TEAM

a. The Client Team
b. The Customer Team

4. Dealing with Other Constituencies

a. Employees
I. Severance Issues and Resulting Liability
II. Retaining/Binding Key Employees
III. Shifting Loyalties
IV. Unions
V. Employee Benefits and Human Resources
VI. Effective Communication and Confidentiality

b. Customers and Suppliers
I. When to notify
II. Who bears the Risk of Lost Relationships?



c. Other Contracting Parties
d. Creditors

5. Planning for a Sale

a. Conducting a Presale Examination
b. Assessing the Need for and Finding an Intermediary
I. Types of Intermediaries
II. Factors to Consider
III. Finding an Intermediary
IV. Terms of the Engagement

c. Marketing Materials

d. Employee Retention Arrangements

I. Stay Bonuses
II. Severance Arrangements
III. Tax Considerations

e. The Type of Buyer

I. Understanding the Seller’s Motivation
II. Selling to Employees
III. Selling to a Third Party

6. Embarking on the Sale Process

a. Selecting the Method of Sale
b. Identifying Potential Buyers
c. Identifying Potential Sellers
d. Maintaining Confidentiality

I. Maintaining Confidentiality of the Deal
II. Maintaining Confidentiality of Shared Information

e. The Negotiated Sale

I. Letter Soliciting Indications of Interest
II. Letter Regarding Facility Visit, Data Room Visit and Review of Accountants’ Workpapers

7. Business Valuation – multiple of EBITDA or some other method MRI defers this to others we can act as a facilitator to get the basic information. We can also go back and forth between the parties to get answers to financial questions. MRI Hendersonville does have access to a Forensic Accountant, CPA that could assist with this activity.


8. Negotiating the Deal

a. Acquiring Background Information
b. Negotiating the Price

I. The Parties and Their Representatives
II. Personalities
III. Client Priorities
IV. Internal Factors Affecting Price
V. External Factors Affecting Price
VI. Closing Price Adjustments or True-Ups
VII. Earnouts

c. Negotiating the Structure

I. Substance of the Transaction
II. Stock vs. Assets
III. Nature of Buyer
IV. Legal form of the Target
V. Form of Consideration
VI. The Speed of the Transaction
VII. Psychology of the Transaction
VIII. Existing Impressions
IX. Liabilities of the Target
X. Ownership of Assets
XI. Financing
XII. Guaranties
XIII. Existing Agreements
XIV. Substantive Law Issues (Canadian and USA and Mexico and China and Possibly European)
XV. Other Regulatory Issues

9. Pacing the Deal and Negotiation Impediments

a. The Pace of the Deal – “Time Kills All Deals”
b. Negotiating Impediments and the Human Element

I. Your Team
II. Difficult Team Members (Legal Counsel) on the Other Side
III. The Obstreperous (hostile and argumentative) Client

10. Conducting Due Diligence

a. General Observations

I. The Objective of Due Diligence
II. Technology Advances; Virtual Data and Deal E-Rooms

III. Due Diligence in a Nutshell
IV. Factors Affecting the Extent of Due Diligence
V. Game Theory and Due Diligence
VI. Professional Risks in the Due Diligence Process

b Sell Side Due Diligence

I. Risks to a Seller
II. Objectives and Strategies of a Seller
III. Seller’s Presale Due Diligence
IV. Putting Together the Data Room/Responding to a Due Diligence Request
V. Running the Data Room
VI. Coordination of Seller’s Due Diligence/Preparation of Schedules

c. Buy-Side Due Diligence

I. Risks to a Potential Buyer
II. Objectives and Strategies
III. Initiating the Due Diligence Process

d. The Due Diligence Team

I. Assembling the Team
II. Agreeing to the Objective
III. Communications
IV. The Due Diligence Checklist
V. Properly Tailoring the Due Diligence Checklist
VI. Pre-Visit Requests Regarding the Data Room
VII. The Responses to the Due Diligence Request
VIII. The Data Room Visit (Establishing Data Room Procedures)
IX. Reviewing Documents (in the Office or the Data Room)
X. Management Presentations and Site Visits
XI. The Review Process: Next Steps
XII. The Due Diligence Report
XIII. The Result of the Process
XIV. What Happens After the Due Diligence Report is Made?
XV. Continuing Due Diligence
XVI. Review of the Disclosure Schedules
XVII. Post-Signing Due Diligence
XVIII. Post-Closing Due Diligence


11. Preparing The Acquisition Agreement and Related Documents

a. Understanding the Client’s Objectives
b. Preparing the Agreement (In-House or Contract Lawyers will do this)

I. Who Prepares the First Draft?
II. Sources of Precedent
III. Preparing the First Draft
IV. Deciding on the Approach
V. Arranging for Review Before Distribution
VI. Distributing the First Draft
VII. Reviewing and Responding to the First Draft
VIII. Bluelining and Other Customs and Courtesies

c. Negotiating the Agreement

I. Who Will Negotiate the Terms?
II. Coordinating the Negotiation
III. How and Where Negotiations Occur
IV. Resolving Issues
V. Negotiating Tactics
VI. Iterative Process
VII. How Negotiations Are Broken Off
VIII. How Negotiations Are Successfully Concluded

d. Recurring Issues in an Agreement

I. The Parties
II. Conventions
III. Exceptions and Qualifiers
IV. Representations
V. Pre-Closing Covenants
VI. Post-Closing Covenants
VII. Conditions
VIII. Termination
IX. Remedies
X. Miscellaneous Provisions

e. Schedules to the Agreement

I. Exceptions to the Representations
II. Approaches to Schedule Preparation
III. Preparing the Schedules
IV. Establishing General Principles
V. Delivering the Schedules
VI. Supplementing the Schedules

f. Related Documents
I. Third Party Consents or Approvals
II. Side Letters
III. Ancillary Agreements
IV. Satisfaction of Additional Obligations
V. Execution of Documents


12. Getting from Agreement to Closing

a. Avoiding the Post-Signing Let Down
b. Contemplating the Closing
c. Practical Issues Not Covered by the Acquisition Agreement
d. Organizing the Closing
e. Conferring with the Client
f. Covenants

I. Bridging the Gap – Best Efforts
II. Access and Due Diligence
III. Confidentiality
IV. Adjusting the Business Being Purchased
V. Operational Covenants

g. Satisfying Closing Conditions

I. Consents
II. The SEC Process
III. HSR Filings
IV. Shareholder Approvals
V. Real Estate Matters

h. Financing Contingencies and Dealing with Third Party Funding Sources


13. Coping with The Troubled Deal

a. Walk (Termination) Rights and Limitations

I. Negotiated Termination Rights
II. Liability Claims Limited by Contract
III. Resisting The Assertion of Termination Rights

b. Judicial Limitations on Contract Remedies

I. Recourse of the Terminated Party

c. Assessing Alternatives When a Deal Is Faltering

I. Formulating Strategy – The Not Yet Failed Deal
II. Mutual Fault
III. Preparing for Litigation

d. Pre-Closing Discovery of a Breach

I. Discovery by the Breaching Party
II. Discovery by the Non-Breaching Party


e. Failed Deal Clean-Up

I. Communications
II. What Happens to the Deposit?
III. Return or Destruction of Documents
IV. Break Up Fees

14. Closing the Deal

a. Planning the Closing Process

I. Get Ready for Some Fun
II. Preparation for Closing – The Client
III. Preparation for Closing – The Other Side

b. The Closing Agenda

I. Where’s My List?
II. When Should It Close? The Closing Date and the Timetable

i. Are You Ready?

c. Place and Time of Closing

I. My Place or Yours?
II. May I Come to Your Party
III. Have the Details Been Arranged?

d. The Pre-Closing

I. The Cure for the Chaotic Closing
II. Can We Spend All Week Doing This?
III. Do We Really Have to Close?
IV. But there Are Still Issues Out There! The Messy Closing

e. The Closing Itself

I. An Advisor’s Utopia (The Lawyers Like it Also)
II. Is That All There Is?

f. The Closing Statement and Alternatives

I. Does the Closing Statement Matter?
II. If This Is So Important, Why Wait Until the End?
III. Is It Binding?
IV. Potential Waiver of Conditions

g. Mechanics of Closing

I. Did I Sign That?
II. All We Need Is Signatures
III. Paper Clips?
IV. Trust Me
V. Is That Really Your Signature?
VI. Why Do We Need These Legal Opinions, Anyway?
VII. Was I Supposed to Bring The Money?
VIII. Weekends Are for More Than Golf
IX. Facing and Funding Deadline
X. Is It My Business Now?

h. Deals Not Ready to Close

I. This Just Isn’t Happening
II. Who Do You Trust, and for How Long?
III. Yet Another Agreement to Draft


i. Non-Legal Aspects of Closings

I. While You’re at It

j. Common Pitfalls – Legal Activity
k. What Is the Agreement?


15. Handling Post Closing Matters

a. Post-Closing Considerations

I. Expect the Unexpected
II. Living with the Deal

b. Immediate Post Closing Matter

I. Deal Cubes and Closing Dinners
II. Closing Documentation Clean Up
III. Announcements
IV. Post-Closing Filings and Loose Ends
V. True-Ups
VI. Closing Binders and Files


c. Longer Term Post-Closing Matters

I. Implementing Lessons of Due Diligence
II. Document Retention and E-Discovery
III. Expiration of Claim Periods and Termination of Escrows

d. Indemnification and Other Remedies

I. The Aggrieved Buyer
II. Preparing the Claim
III. Responding to the Claim
IV. Third Party Claims
V. ADR or Litigation
VI. Non-Indemnification Claims

e. Earnouts

f. Post-Closing Covenants

I. Transition-Related Covenants
II. Covenants That Protect the Value of the Transaction
III. Transition Services Agreements

g. Appraisal Proceedings