Time critical M&A – maximising value before it’s too late
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 Chris Ratten, National Head of Restructuring for RSM Tenon
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YOU know when you put an ice cube in the sun that it will eventually melt – it’s only a matter of time. The same can be said about a distressed business. It’s only a matter of time before its value melts away. Accelerated mergers and acquisitions (AMA) is the solution often sought by stakeholders. This can be a highly successful strategy if handled well, but care is needed. During any AMA process, shareholders need to be realistic and management teams need to cooperate. It is a regrettable fact that the best deals often fail to be made: only the right process can help to ensure a successful outcome. RSM Tenon helps to lead executive management through a fast track transaction before it’s too late. Early engagement and fast assessment can lead to capital raising or business disposal. It’s a key part of helping to preserve or maximise a business’s value. The first step is to establish a working time line, working backwards from establishing the ‘drop dead’ date, i.e. the point at which the company runs out of money. This gives a firm indication of how much time is available to preserve a going concern. Next, it is critical that the business owner creates a data room of information for investors or business buyers to review. Providing a full suite of historic and forecast information upfront will significantly cut the time required for due diligence. Producing a full information memorandum is also essential. This is provided to interested parties who have received a ‘teaser’, after they agree to a non-disclosure agreement (NDA). Naturally, care must be taken not to give sensitive information to competitors, or to have management waste time with ‘tyre kickers’. Firm control is vital, although of course it’s realistic to expect some ‘leakage’. What matters most is the end result: a committed transaction in quick order. During the process, cash stabilisation tactics may be needed, and stakeholder management is important – especially efforts to keep the workforce ‘on side’ so that you maintain a going concern. Landlords, suppliers, lenders and sometimes trade insurers may need careful handling. It is usually a good idea to keep customers informed, but information should be consistent with an agreed message. The best outcome will depend on giving access to a large qualified pool of equity providers and buyers who can move quickly. RSM Tenon works with the executive management team to prioritise the best order of approach for potential buyers. Second chances are few and far between, and this means that confidence in a proposed deal can sometimes be the single most important factor: does a buyer have the money to deal? A law firm to represent them? Finally, if the company is left with net liabilities after selling its business, an administration may be required to give the purchaser good title to the business assets. It’s probably fair to say that time critical M & A is more of an art than a science. Planning is essential, and so is good management, but the right result is often as much about banging heads together as establishing a good price. More articles in
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