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Rumblings on "Private-to-Private" M&A deals
From an M&A practitioner perspective, I can't help but to think there will be a newfound appreciation for the level of complexity involved in consummating these specific types of transactions in today's environment
Let me explain...🧵
From an M&A practitioner perspective, I can't help but to think there will be a newfound appreciation for the level of complexity involved in consummating these specific types of transactions in today's environment
Let me explain...🧵
Talks of a wave of "VC-backed consolidation" over the next 12-18 months have been pervasive in various Valley circles recently, and manifesting in the form of:
🤝 Buyers using '21 valuations opportunistically as "M&A currency"
🤝 "Roll-ups of last resort" for subscale players
🤝 Buyers using '21 valuations opportunistically as "M&A currency"
🤝 "Roll-ups of last resort" for subscale players
There have been a number of "private-to-private" all-stock (or majority stock) combinations that have been consummated before
Two "success stories" that come to mind are 1) Seamless + Grubhub and 2) Elance + oDesk (now $UPWK)
But these deals have enormous underlying complexity
Two "success stories" that come to mind are 1) Seamless + Grubhub and 2) Elance + oDesk (now $UPWK)
But these deals have enormous underlying complexity
The term "hostile takeover" begets images of "raiders" dawning two-toned collared shirt & suspender combos, screaming into phones in a cigar-smoke-clouded mahogany rooms filled with dot matrix printer tear-sheets...
But, $EMR showed that companies too can also "go hostile"🧵
But, $EMR showed that companies too can also "go hostile"🧵
So yesterday, $EMR announced *a proposal* to acquire $NATI for $53.00 a share (~$7.6bn and 32% premium to last close)
$NATI is a $1.7bn electronic T&M business with 70% GMS, 35K customers across diverse end markets
Deal would advance $EMR's global automation focus & strategy
$NATI is a $1.7bn electronic T&M business with 70% GMS, 35K customers across diverse end markets
Deal would advance $EMR's global automation focus & strategy
Why go "hostile"?
Well, in short, if as a buyer you're getting stonewalled by management & their Board, you can put the target "in play" by going directly to shareholders
$EMR made many attempts to engage with $NATI in private dating to 5/22 with no constructive engagement
Well, in short, if as a buyer you're getting stonewalled by management & their Board, you can put the target "in play" by going directly to shareholders
$EMR made many attempts to engage with $NATI in private dating to 5/22 with no constructive engagement
M&A is capital allocation tool to help reimagine the strategic priorities in a company's portfolio
But what happens when the pieces of the portfolio "no longer fit"?
"Separation" transactions are complicated & often misunderstood by investors
Here's some good stuff to know🧵
But what happens when the pieces of the portfolio "no longer fit"?
"Separation" transactions are complicated & often misunderstood by investors
Here's some good stuff to know🧵
WHY do companies "break-up"?
Some reasons:
☑️Enhance operational focus
☑️Accommodate differing capital needs
☑️Create distinct "identities" for investors
☑️"Align" equity comp & currency for M&A
☑️Mitigate anti-trust concerns
☑️Quell activist pressure to "unlock value"
Some reasons:
☑️Enhance operational focus
☑️Accommodate differing capital needs
☑️Create distinct "identities" for investors
☑️"Align" equity comp & currency for M&A
☑️Mitigate anti-trust concerns
☑️Quell activist pressure to "unlock value"
HOW do companies "break-up"?
Some pervasive mechanisms that companies have used to "unbundle the conglomerate discount" include the following:
1⃣ Divestitures
2⃣ Spin-Offs
3⃣ Split-Offs
4⃣ Carve-Out IPO
5⃣ Spin-Mergers
(NOTE: this isn't exhaustive; see WLRK for reference)
Some pervasive mechanisms that companies have used to "unbundle the conglomerate discount" include the following:
1⃣ Divestitures
2⃣ Spin-Offs
3⃣ Split-Offs
4⃣ Carve-Out IPO
5⃣ Spin-Mergers
(NOTE: this isn't exhaustive; see WLRK for reference)
M&A always gets buzz in the public markets
But, many investors don't understand what a deal means for them as a shareholder
Also, most can't be bothered reading thousands of pages of underlying documentation (or just get it very wrong)
Here are the SEC filings to dig into🧵
But, many investors don't understand what a deal means for them as a shareholder
Also, most can't be bothered reading thousands of pages of underlying documentation (or just get it very wrong)
Here are the SEC filings to dig into🧵
⏳At Announcement ("T+0")
8-K & 425
✅Press Release
✅Investor Presentation
✅Transaction Docs
Takeaways:
🤔Focus on "how it works" (rationale + mechanics)
🤔Ask yourself: "what do I get or give here?"
Example: how the $10bn $ADBE stock part of Figma deal *technically* works
8-K & 425
✅Press Release
✅Investor Presentation
✅Transaction Docs
Takeaways:
🤔Focus on "how it works" (rationale + mechanics)
🤔Ask yourself: "what do I get or give here?"
Example: how the $10bn $ADBE stock part of Figma deal *technically* works
Takeaway #2: "Read Between the Lines"
🤔Stop and ask "why did they do this?"
🤔Stop and ask "where's the risk?"
Examples (all co-dependent variables)
1⃣Deal Closing (i.e. why close on X date)
2⃣Termination (i.e. who's at risk of not closing)
3⃣Others (i.e. "go shop" in PE deals)
🤔Stop and ask "why did they do this?"
🤔Stop and ask "where's the risk?"
Examples (all co-dependent variables)
1⃣Deal Closing (i.e. why close on X date)
2⃣Termination (i.e. who's at risk of not closing)
3⃣Others (i.e. "go shop" in PE deals)
DueDilio Case Study Tuesday
Highlighting some of the projects we facilitate.
This one comes from a searcher...👇
1/5
Highlighting some of the projects we facilitate.
This one comes from a searcher...👇
1/5
"I am acquiring an engineering shop and need a Quality of Earnings Report done as well as financial modeling of the future for this company. Need this as part of the SBA process and for my internal use.
2/5
2/5
The company will be purchased as an asset sale with an SBA 7(a) loan program. The current entity is an s-corp and does its accounting on a cash basis. The business owner uses Quickbooks but doesn't fully utilize its capabilities.
3/5
3/5
DueDilio Case Study Tuesday
Sharing some of the projects we facilitate.
This one comes from a search fund...👇
1/4
Sharing some of the projects we facilitate.
This one comes from a search fund...👇
1/4
"We're acquiring a commercial landscaping business in the Southeast that does about $6M in revenue. We're looking to have a valuation of hard assets performed. It's a combination of trucks/vehicles, trailers, heavy equipment and mowers.
2/4
2/4
We'd really just like to confirm the asset value is generally in line with what the seller is saying."
Results...👇
3/4
Results...👇
3/4
Today in the #TheStrategicMnALounge…
Strategic M&A Lounge Principle #5: Deal Structure
Deal structuring gets a lot of airtime between M&A professionals. For good reason, it is a fun and sexy topic and it has earned its ability to get attention in bars all over the world. 🧵
Strategic M&A Lounge Principle #5: Deal Structure
Deal structuring gets a lot of airtime between M&A professionals. For good reason, it is a fun and sexy topic and it has earned its ability to get attention in bars all over the world. 🧵
I love talking about creative deal structures like everyone else but what is oftentimes missed is the discussion about its usefulness as a critical tool to get deals closed and manage risk.
In the current deal environment, supply of good businesses still is well short of the available capital looking for good companies to buy. This supply/demand dynamic has, among other reasons, created a market of elevated prices.
