Exclusive, Private M&A: A CFO Checklist

Don't be fooled: a private, exclusive merger or acquisition transaction involves the same level of thorough preperation, due diligence and onerous time commitment as any other deal, say chief financial officers interviewed by ansarada. A private company acquisition of another private company or business unit can take at least nine months, with three months of intensive due diligence, say the CFOs. The acquirer typically does such deals to broaden its customer base and skill set. The initiative of the transaction usually comes from the chairman and or chief executive who have spoken to their counterpart. The rationale of the transaction is formally presented to the acquirer’s board of directors in the form of a written paper. The board would then vote on whether to pursue the transaction. If the board pursues the deal it will receive due diligence reports related to the acquisition along with financial forecasts of the planned combined businesses. The board will have to sign off on any debt financing related to the transaction and have an input into the major areas of due diligence. A trusted external adviser of the chairman and or CEO leads the deal team of the acquirer. Often a major shareholder will also be represented on the deal team along with the general manager of a business unit and the CFO.

In addition, another team of outside advisers will be involved in the transaction. These advisers are typically a corporate lawyer, an independent finance and tax team plus an expert in the business being bought. The external corporate finance adviser experienced in M&A will drive the acquisition through an agenda and timetable, direct the deal team and should take responsibility for deal documentation and the quality of the due diligence. CFOs who have done numerous private M&A say that face-to-face meetings and site visits are imperative in order to verify and get the story behind the numbers. A private, exclusive acquisition checklist, the CFOs say, should include:

• a due diligence checklist agreement
• due diligence itself
• site visits
• due diligence review
• legal agreement review
• investment cases
• post acquisition integration