Second round
M&A / Merger ModelThe stage where shortlisted bidders get full diligence access and are asked for binding offers.
Shortlisted bidders receive the data room, management presentations, expert sessions and access to advisers. This is where the price is genuinely tested, because it is the first time a bidder can verify what it was told.
It is expensive for bidders, running to substantial adviser fees, which is why sellers shortlist carefully. Inviting too many parties wastes their money and damages the seller's reputation for running credible processes.
It ends with binding offers accompanied by a mark up of the sale and purchase agreement and evidence of committed financing. The legal mark up is often as decisive as the number.
The seller may then run a final phase between the last two bidders, or grant exclusivity to one, trading residual price tension for speed and certainty.
Worked example
Five bidders get the data room, two management presentations and expert sessions on the customer base and environmental position.
Each spends roughly 1 to 2 on advisers, which is why sellers shortlist carefully rather than inviting everyone through.
It ends with binding offers plus an SPA mark up, and the seller may then run a final round between the top two or grant exclusivity to one.