Preparation phase
M&A / Merger ModelThe four to eight weeks before a sale process launches, when the equity story, materials and buyer list are built.
Preparation largely decides the outcome, and it happens before any buyer has heard of the deal. The bank and management agree the equity story, meaning the argument for why this business is worth what they intend to ask.
Financials are cleaned and normalised, a data room is populated, the confidential information memorandum and teaser are drafted, and the buyer list is built and tiered by likely interest and ability to pay.
Vendor due diligence, where used, is commissioned here. So is any pre sale reorganisation: carving out a division, settling intercompany balances, or separating assets the seller intends to retain.
Rushing it is the classic error. A process launched before the story is coherent or the data room is complete loses momentum in the first round, and lost momentum in an auction is very hard to recover.
Worked example
Six weeks before launch: the equity story is agreed, three years of financials are normalised, the data room is populated, and the buyer list is tiered into twelve strategics and eighteen sponsors.
A carve out also has to be dealt with here, separating shared IT contracts and settling intercompany balances, or the first round will surface questions nobody can answer.
Launching before this is done loses momentum in round one, and momentum in an auction is very hard to recover.