M&A Deal Process: Defining the Role of the Investment Banker, Avoiding Valuation Issues and Costly Delays

M&A transactions are typically lengthy and complex, and a flawed process can negatively affect the transaction's pricing as well as the certainty and timing of closing. The acquiring company, the target, and their respective counsel and investment bankers must consider the type of acquisition (strategic vs. financial), the synergies involved (hard and soft), and anticipated transaction costs when mapping out the deal process.

The investment banker's role in M&A transactions may vary based on several factors, including whether the target and acquirer have already been identified, the amount of due diligence that needs to be done on the target, and whether an auction or other market check process will be employed. Before engagement, counsel must carefully consider the investment bank's engagement letter and defining its role, compensation, terms of engagement and potential conflicts of interest.

Prior to going to market or engaging in discussions with a potential buyer, the target must have a firm understanding of the likely value of its business in the market. The investment bank will drive this process through a combination of a market and valuation analysis, including working with management to refine its projections, identify and quantify EBITDA "add-backs," additional costs a buyer will incur, and synergies a buyer will enjoy. In addition, the target and its counsel should consider obtaining a fairness opinion from the investment bank engaged to market the target or from an independent investment bank.

Listen as our authoritative panel discusses the M&A deal process, including bidding procedures, valuation, and the investment banker's roles, compensation, and engagement letter.