On the buy-side, Ivy’s singular experience is in assisting senior corporate executives (“SCE’s”) running Strategic Business Units (“SBU”) or Groups or Platforms of large corporations. In addition to operating responsibility, SCE’s are also often charged with the task of identification and execution of acquisitions to grow and expand the products and markets of the Divisions in their Platform/Group. These are called “bolt-on” acquisitions or “Add-ons”—meaning that they add to the product lines compatible with the existing markets and capabilities of the Platform companies. A SCE is typically a “President” or “Group Managing Director”.
ICA has carried out numerous such projects resulting in successful “bolt-on” acquisitions, wherein we often start with a “clean slate” and develop the acquisition plan from initial conception of a proposed acquisition to complete presentation and execution of a buy-out. In recent years, Indian companies, even if single platform-based, have become prolific acquirers of businesses abroad. Regardless of the size of the corporate acquirer, the following are essential phases in a Structured Approach for corporate buy-side acquisitions:
- Uncover, pre-qualify, contact and direct outreach to Targets (“Target” or “Targets”) based on potential strategic fit, and reasonable likelihood and willingness to be able to consummate a transaction (“Deal”)
- Engage in initial discussions with one or more proposed Targets on behalf of client
- Zero in on specific Target agreeable to further discussions; initial visitations with client
- Exchange Non-Disclosure Agreements (a.k.a. Confidentiality Agreements)
- Preliminary diligence to establish Value and further Go or No-Go indicators
- Assist client in exchanging a non-binding Initial Indication of Interest (“IOI”)
- Information gathering and presentation of financials to client and running Go or No-Go evaluation to pursue or decline
- Work with client to establish the Deal Terms, to be exchanged with Target in a non-binding Letter of Intent (“LOI”) and begin internal due diligence by clients’ own team of managers
- Client will at this stage pull in (i) Auditors for Full Due Diligence of financials, (ii) other experts, such as for environmental due diligence and attorneys for legal and regulatory due diligence, and for drafting and exchanging definitive Buy-Sell Agreement
- From here on, the process is one of continual attorney negotiations and exchanges of drafts until a final Buy-sell Agreement is in place and escrow arrangements made for payment
Important Notes recommended by ICA:
- Do not pull in Attorneys, Auditors and experts until the stage specified above, where they are needed for the run-up to final outcome. Attorneys are not business persons and early involvement is often a deal killer.
- Until and unless a definitive Buy-Sell Agreement is executed and exchanged, a Deal remains largely non-binding unless otherwise agreed. In some instances a strong seller candidate may require a fee for termination of discussions after Due Diligence.