M&A Advisory Services

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Investment Banking M&A Advisory Services

As a result of much corporate consolidation throughout the 1990’s M&A advisory became an increasingly profitable line of business for investment banks. M&A is a cyclical business that was hurt badly during the financial crisis of 2008-2009, but rebounded in 2010, only to dip again in 2011.

In any event, M&A will likely to continue being an important focus for investment banks.  JP Morgan, Goldman Sachs, Morgan Stanley, Credit Suisse, BofA/Merrill Lynch, and Citigroup, are generally recognized leaders in M&A advisory and are usually ranked high in M&A deal volume.

The scope of the M&A advisory services offered by investment banks usually relates to various aspects of the acquisition and sale of companies and assets such as business valuation, negotiation, pricing and structuring of transactions, as well as  procedure and implementation.

One of the most common analyses performed is the accretion/dilution analysis, while an understanding of M&A accounting, for which the rules have changed significantly over the last decade is critical. Investment banks also provide “fairness opinions” – documents attesting to the fairness of a transaction.

Sometimes firms interested in M&A advice will approach an investment bank directly with a transaction in mind, while many times investment banks will pitch ideas to potential clients.

Learn More → Investment Banking Primer

What is M&A Advisory Work, Really?

First, we’ll begin with some basic terminology:

• Sell-Side M&A: When an investment bank takes on the role of an advisor to a potential seller (target), this is called a sell-side engagement.
• Buy-Side M&A: Conversely, when an investment bank acts as an advisor to the buyer (acquirer), this is called a buy-side assignment.

Other services include advising clients on joint ventures, hostile takeovers, buyouts, and takeover defense.

M&A Due Diligence

When investment banks advise a buyer (acquirer) on a potential acquisition, they also often help to perform what’s called due diligence to minimize risk and exposure to an acquiring company, and focuses on a target’s true financial picture.

Due diligence basically involves gathering, analyzing and interpreting the target’s financial information, analyzing historical and projected financial results, evaluating potential synergies and assessing operations to identify opportunities and areas of concern.

Thorough due diligence enhances the probability of success by providing risk-based investigative analysis and other intelligence that helps a buyer identify risks – and benefits – throughout the transaction.

Sample Merger Process

Week 1-4: Strategic Assessment of Possible Transaction

• The Investment Bank will identify potential merger partners and confidentially contact them to discuss the transaction.
• As potential partners respond, the Investment Bank will meet with potential partners to determine if the transaction makes sense.
• Follow-up management meetings with serious potential partners to establish terms

Weeks 5-6: Negotiation and Documentation

• Negotiate Definitive Merger and Reorganization Agreement
• Negotiate Pro Forma Composition of Board of Directors and Management
• Negotiate Employment Agreements, as required
• Ensure Transaction Meets Requirements for a Tax-Free Reorganization
• Prepare Legal Documentation Reflecting the Results of Negotiations

Week 7: Board of Directors Approval

• The Client’s and Merger Partner’s Board of Directors Meet to approve the transaction, while the Investment Bank (and the investment bank advising the Merger Partner) both deliver a Fairness Opinion attesting to the “fairness” of the transaction (i.e., nobody overpaid or underpaid, the deal is fair).
• All definitive agreements are signed.

Weeks 8-20: Shareholder Disclosure and Regulatory Filings

• Both companies prepare and file appropriate documents (Registration Statement: S-4) and schedule shareholder meetings.
• Prepare filings in accordance with antitrust laws (HSR) and begin preparing integration plans.

Week 21: Shareholder Approval

• Both companies hold formal shareholder meetings to approve the transaction.

Weeks 22-24: Closing

• Close merger and reorganization and Effect share issuance