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M&A Transactions: Structuring Equity Investments

What to Do During a Serious M&A Sales Conversation

If you segue into a conversation about doing an M&A deal, start asking questions! Ask about the business: what it does, its history, the revenues, the earnings before interest, taxes, depreciation, and amortization (EBITDA), how the company is incorporated.

You can also inquire about customer mix, how the company goes to market, and who its vendors are. Of course, you’ve already researched this information to some extent; the idea here is to get the owner to start providing more detail to augment that research.

An owner eventually pulls back a bit as you ask her for more and more information. When that happens, suggest enacting a confidentiality agreement (CA) between your respective firms. If you’ve planned ahead, you should have a CA ready that you can e-mail to the owner.

You should also work to manage the expectations of others, so lay out the next steps. Tell the owner that after the CA, you want to review the company’s financials (income statement, balance sheet, and if handy, cash flow statement), and then set up a visit at his office/factory/facility if everything is “green light go.”

After the owner has sent you the financials, and if the company’s numbers look like they meet your criteria, set up a meeting with the owner. If the owner asks for your intentions prior to setting a meeting, submit an indication of.

If you get into a serious conversation and find the Seller seems unusually reluctant, be wary. She may simply be seeking a free (or inexpensive) valuation on her business.

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