1. M&A TOOLKIT
Closing:
Closing Process
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2. Negotiating and closing process are very different for buying a
listed company compared to a private company
LISTED vs PRIVATE PROCESS
Buying a Listed Company Buying a Private Company
Process Strict timetables and rules Flexible
Approach At some point, formal to Board Informal, build relationship
Negotiation Focused on price; can go hostile Anything possible directly with
(w/o target Board) owners
Deal structure Cash or Shares; no deferred Anything possible
Offer Public Tender Offer Confidential Heads of Terms
Due Diligence Limited time and access Whatever negotiated
Negotiations after due Limited options - walk away; Unlimited – renegotiate anything
diligence reduce offer price
Regulatory Anti-trust/monopoly Anti-trust/monopoly
approval +Stock Exchange rules
Closing process Declare Unconditional Share Purchase Agreement
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3. A Conditional Offer, followed by the Shareholder Purchase
Agreement are the key milestones in a private deal
PRIVATE DEAL PROCESS
Negotiation
Strategic Post-merger
Valuation and deal Closing
logic Integration
structuring
Permission to HEADS OF TERMS/
approach CONDITIONAL
OFFER
Negotiate Offer
Deal Structuring Shareholder
Due Diligence Purchase
Agreement
Negotiate SPA
Confidentiality & No
Shop Agreement
Letter of Intent? Regulatory Approvals
CLOSE
Plan Integration
Internal
approvals
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4. Buying a Listed company has to follow a tightly legally defined
process with a strict timetable and requirements
LEGAL TIMETABLE FOR BUYING A UK LISTED COMPANY
Last date for
May 28 days Post Offer
Announcement First Closing fulfilment First posting of
of firm offer Document Last date for offer to be of any other consideration
Date First date on which Target
declared unconditional conditions (14 days after
shareholders who have
as to acceptances, ie of the Offer Offer becomes
accepted the Offer may
Offer will lapse if (assuming Offer wholly
withdraw acceptance
acceptances sufficient became unconditional)
provided the offer is not yet
to give Offeror unconditional as
Press release unconditional as to
The offer voting control have not to acceptances on
announcing firm Earliest date on acceptances (assuming first
document is been received Day 60)
intention to which the offer can closing date is Day 21)
sent to Target’s
make offer be closed
shareholders
Announcement of
acceptance levels
Max 21 days Max 14 days
Min 21 days Min 21 days
Day 0 Day 14 Day 21 Day 39 Day 42 Day 46 Day 60 Day 81
Min 14 days thereafter
No prescribed
time limit
Procedure for
compulsory
acquisition of
Announcement remaining minority
of approach/ possible Last date for Last date for Implemented
offer in the event release of Last date for
dispatch of first provided 90%
of significant share material new revising Offer
defence thresholds are
price movement document information by reached
CB Target
CB: Normally only relevant for competing bids CB
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5. The company deal team coordinates Third Party advisers when
buying a listed company
THIRD PARTY ADVISERS IN A DEAL
Lawyers Investment Banks
Prepare all
documents, sub Negotiate, run
missions and auctions, do
contracts; legal valuation, arrange
due diligence financing
Deal Team
PR Firms
Accountants
Financial
due
diligence
Consultants
Present deal
Plan and support to media
post merger
integration
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6. M&A advisors can be very expensive, even on failed deals
BHP ABANDONS BID FOR RIO TINTO
“BHP infuriated its shareholders by revealing that it had spent $450 million on the
failed deal, running up vast bills for the arrangement of financing and advice from
investment banks, lawyers, accountants and public relations firms.
Rio Tinto, meanwhile, is estimated to have spent about £120 million on the six
investment banks, two law firms, one accountant and one public relations company
that it used to help to fend off the unwanted suitor.
European Commission’s insistence that BHP divest
Rio Tinto’s key iron ore and coal assets was the deal breaker.”
BHP’s share price closed at £10.51, up by 7.2 per cent (+£4 billion),
and Rio ended at £15.55, down 36.7 per cent (-£13 billion).
Source: Financial Times, 26th Nov 2008
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