Growth through acquisition can be a critical component of an entrepreneur’s business expansion. Increasing the size and scope of your organization through M&A can offer benefits such as increased geographic distribution, customers, products, services or technologies and/or personnel.
Glendale Capital Partners has the experience in middle market transactions to greatly facilitate a successful acquisition strategy. Critical to a successful M&A program is the development of a rigorous process to screen, identify and evaluate potential acquisition candidates. We can help you clarify and refine your specific transaction objectives and the criteria to be used to evaluate potential targets, including industry niche, operations, sales volume, profitability, geography, management and more.
Candidate Screening & Selection
A targeted buy-side search process can begin once the acquisition profile is established. Glendale Capital Partners uses a number of databases, industry associations and other sources to identify targets that fit your profile. This process may include many targets that are not currently on the market, but might be interested in a sale if approached properly. It also can include potential targets your company has previously identified.
Using a third party for the initial contact with these targets can be critical. As most entrepreneurs are aware, target companies frequently receive calls from investment bankers, business brokers and competitors inquiring about their availability for sale. These “fishing expeditions” usually lead nowhere and make targets skeptical of entertaining a sale process. Glendale Capital Partners serves as your representative to reach the key decision maker at a target and arrange an introductory discussion as to the seriousness of our inquiry.
Your management team is focused on running your business. You hire Glendale Capital to do the “legwork” on much of this buy-side process. Part of our job is to gather pertinent information on target companies so we can evaluate those opportunities against your acquisition profile. Following this initial screening, we will present suitable candidates to your management team for further evaluation and internal discussion.
Next, we will request additional diligence information from the resulting target list to further refine which are viable candidates. We continue to serve as the intermediary until you reach the point of scheduling a site visit and requesting more detailed diligence.
Site Visit & Diligence
It is extremely helpful in the buy-side process for selected members of our client’s and a target’s management teams to have a face-to-face meeting, onsite at the target’s business location. Glendale Capital can gather and evaluate written information and financials, but a meeting between management teams cannot be outsourced in this process. Occasionally, a prospective target will not meet until an offer is submitted, but for M&A deals within the lower middle market, we normally can arrange an introductory meeting between the parties at this stage of the buy-side process.
In conjunction with a site visit to a desirable target, Glendale Capital develops a valuation model containing historical and projected financial statements, quality of earnings adjustments, working capital requirements and a proforma capital structure to determine a valuation for the business. Based on these results, plus cash flow requirements, we will advise you on a transaction structure necessary to prepare a preliminary bid for the target.
Letter of Intent
Glendale Capital will work with your transaction counsel to draft a customized Letter of Intent (LOI) for submission to the target. The LOI includes certain binding and non-binding terms and outlines the primary components of your intended transaction. Following deliberation between our client and the target, the LOI will be mutually executed between the two parties, providing both parties a level of comfort that the general framework of a deal has been agreed to before significant effort in detailed due diligence is conducted by our client.
The due diligence process includes a legal, financial and strategic review of the target’s documents, such as financial statements/tax returns, contracts, patents, etc. Our client’s transaction counsel performs the legal review, its internal/external accountants review the financial information, and its management performs the strategic review. Results of the due diligence investigation will further refine the value of the target’s business and may affect deal terms, financing, reps & warranties, employment agreements, etc. included within the binding Purchase Agreement between the parties. We work with your deal team throughout this diligence process.
Prior to closing the transaction, we call upon our understanding of the target’s business, ownership, management and financial situation to help your management team determine the appropriate transaction structure, negotiate deal terms and successfully close the acquisition. We closely review and critique the final legal documents before execution by our client.