All posts by Doug Lovette

Earnouts Can Bring Value Beyond Filling a Valuation Gap

In my experience, earnouts are often used where there is a gap in price between what a buyer is willing to pay and what a seller is willing to accept. In these cases, buyers and sellers can often have legitimate differing opinions as to the current and future value of the target company. Additionally, the metrics of the earnout often require the seller to deliver strong financial results in the future in order to justify the payments on the earnout.

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Securing Your Base – Ensure Employee Support after Acquiring a Company

Since our firm typically works with corporate clients in making strategic acquisitions, we have a unique perspective on the entire process, from initial contact through execution and integration. The following are some best practices that we have seen used effectively by our clients to garner employee support as they integrate an acquisition.

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The Advantages of a Small M&A Team

One of the decisions that an acquisitive company needs to make is choosing the size of the internal M&A team. Many companies opt for the larger teams who can fulfill all the possible requirements of deal planning, execution and integration. However, we have found that opting for a smaller, experienced team that pulls in resources on a project basis can be more advantageous. These teams take a project-driven approach and consist of a handful of core team members. In many cases, these smaller teams are better than the larger teams insofar as their project approach is better suited for inconsistent or unpredictable deal flow. However, the companies that use these smaller M&A teams need to have a good M&A playbook in place for transaction review, analysis, valuation, due-diligence and integration. Along with these requirements, there are particular challenges that arise in several essential areas.

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An M&A Advisor Can Provide Many Benefits in Pursuing Proprietary Acquisitions

While M&A activity continues to expand in the current environment, we find that many companies are becoming increasingly frustrated in their inability to close strategic acquisitions. The reasons for this are varied, but a common theme is the continuing excess of buyers versus sellers and capital versus available transactions. Most of the companies that are actively “for sale”, are typically represented by an investment banker who is motivated and incented to deliver the highest price for their selling client. While many companies can justify a higher price with the synergies that may accrue to the buyer in a strategic acquisition, the time pressure and limited interaction with management that are typical in a competitive sale process, often sour corporate buyers from actively participating in these types of auctions.

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