Are you looking for a buy-side firm to help locate a business for a platform acquisition or bolt on to an existing portfolio? Then consider consulting a buy-side mergers and acquisitions firm. These types of buy-side firms can help private equity companies, family offices and corporations find businesses to purchase. Buy-side Mergers and Acquisitions advisors work with buyers to identify possible companies to merge with and initiate discussion with them.
This article will explain what buy-side Mergers and Acquisitions firms do and how they can help your private equity company or corporation acquire another organization.
What Are M&A Buy-Side Firms and What Do They Do?
A mergers and acquisitions buy-side firm, in short, an M&A firm, is an investment banking firm that advises private equity companies, family offices and other strategic corporations on how to acquire other businesses. In these situations, the M&A firm is also referred to as a buy-side advisor.
Buy-side M&A firms specialize in researching companies for potential acquisition. M&A advisors will first set up a consultation to discuss your company’s essential acquisition criteria with you. Then they will locate companies that appear to meet your criteria. The M&A advisor will then contact these target companies on your behalf to assess them further. If they appear to meet your needs, the advisor will then ask whether they are interested in pursuing a “strategic alternative” or “complementary working relationship” to benefit their organization.
If the target company is open and interested, the M&A advisor will initiate further discussion with the company until a course of action is decided on.
How Does a Buy-Side Mergers and Acquisitions Deal Work?
The process for a buy-side mergers and acquisitions deal typically begins when a business owner who is looking to buy approaches an M&A firm. The potential buyer expresses interest in acquiring a company and asks for assistance with getting the process started.
In some cases, the business owner already knows what company he or she wants to buy and may already be negotiating with the seller. But often, the business owner needs some assistance in determining what company is best to purchase.
Typically, the owner works with a buy-side advisor that researches potential companies to acquire and initiates discussion with the target companies. If both companies are interested in merging, representatives from both parties then begin more in-depth negotiations.
What Else Does a Buy-Side M&A Advisor Do?
The primary role of a buy-side M&A advisor is to work with prospective buyers and to help them find opportunities for acquiring other businesses. The advisor works on the prospective buyer’s behalf and narrows down a list of possible companies to purchase. After identifying these companies, the M&A advisor will contact them to learn more and assess their interest in merging with the buyer’s company.
Another one of the advisor’s roles is to act as an intermediary between the potential buyer and seller. The advisor initiates the dialogue on the benefits of merging or being acquired and presents options on how to proceed. If both parties want to proceed with the merger or acquisition, the advisor will negotiate the specific terms of the acquisition with the target company.
Typically, several rounds of negotiation are required to ensure the terms are mutually favorable. A good advisor will also let their client, the buyer, know when they should stop bidding. If the rounds of negotiation go well, then both companies will approve the transaction.
What Happens if Both Companies are Interested?
In the best-case scenario, the target company and potential buyer are both interested in discussing the possibility of an acquisition. At this point, both companies will usually sign a confidentiality agreement and engage in a more in-depth discussion. Financial information is exchanged and analyzed so that approximate valuations can be calculated.
If both companies decide that an acquisition will be in their best interest after the financial analysis, a letter of intent is drawn up for the transaction. Only then can the actual transaction take place.
At this point, the buyer and the seller’s Board of Directors will meet to approve the transaction. Each company’s investment bank will draw up a fairness opinion stating that the deal is a fair one and that neither party was overpaid or underpaid. When the transaction is approved, then the deal can be closed.
An Advantage To Private Equity and Family Office Firms
If you are a private equity firm, family office or corporation and are looking for new companies to acquire, working with a buy-side mergers and acquisitions firm can make the process much more efficient.
Having an M&A advisor on your side can help you to research and identify appropriate companies, initiate contact, and represent you in dialogues. All of these services can give you a real advantage in finding the right company to purchase and making sure the transaction is in your best interest. These are just some of the reasons why you should consider working with an M&A firm if you are interested in acquiring other companies.
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