Most Important M&A Negotiation Terms

What really changes at a company after being acquired by an outside investor? The answer largely depends on the acquirer. We interviewed Matt O'Donnell, founder of North Shore Commercial Door, on his experience selling his business to private equity backed strategic Torsion Group Corp. Matt discusses the timing of the transaction, some of the emotions he dealt with throughout the negotiation process, trying to juggle running the business while negotiating the sale, and gives some advice for business owners contemplating a similar transaction. 1:50 - What made it the right time for Matt to sell his business?3:15 - What to look for in a strategic partner4:15 - Transitioning into his new role with Torsion Group Corp7:08 - What emotions did he deal with throughout the negotiation process?12:35 - His goals for the company and how partnering with a PE backed strategic will help serve those goals moving forward15:40 - His experience running the day-to-day operations of the company while being immersed in the M&A transaction process16:34 - Advice for business owners contemplating an exit and things he wish he'd known more about prior to entering into the negotiation processFor further discussion on the M&A process, please visit https://www.mcmcapital.com/private-equity-resource-guide-and-information/

What are the most important terms in negotiating the sale of a business? We sat down again with deal attorney Brent Pietrafese of Calfee, Halter & Griswold for a deep dive into legal due diligence. Among other things, we discuss:Protections business owners retaining minority stake in the new business should focus on during negotiationsMost heavily negotiated terms in M&A transactionsKey terms for entrepreneurs when negotiating a post-transaction employment agreementNon-compete clauses in acquisition documents and employment agreementsAdvice for business owners who may be negotiating the sale of their company in the near future 

We interviewed Brent Pietrafese, M&A attorney from Calfee, Halter & Griswold LLP for an overview of M&A due diligence and what business owners should expect from this part of the transaction process.What legal specialty groups are involved in due diligence?What type of information is requested from a buyside legal team during due diligence?What if a business owner doesn't know the answer to a legal M&A due diligence question?Why is it important for a business owner to hire an attorney who's experienced in the M&A transaction process?How long does legal due diligence take and who from the company needs to be involved in the process?The importance of hiring a team of professional advisers outside of the organization to help with the sales process and due diligence Best practices for business owners preparing for a legal due diligence process and most common issues that arise during due diligenceWhat are the  most common factors that hold up a transaction during due diligence?Advice for business owners entering an M&A transaction beyond preparation and organization of documents

We interviewed Kelly Lamirand, Senior Vice President at KeyBank to discuss what business owners should expect from Senior Lender M&A due diligence. Among other things, Kelly discusses:What information do senior lenders require when performing bank due diligence in an M&A transaction?Why do banks conduct due diligence?Common lending terms including revolver availability, cashflow recapture, and airballDiscussion of the "5 C's of Credit," Character, Capacity, Condition, Collateral, Capital What debt levels are senior lenders comfortable with from a total debt perspective and a senior debt perspective?What factors into the interest rate senior lenders charge? Does a bank's relationship with the private equity firm factor into pricing?What are debt covenants and what purpose do they serve?How do banks view growth capital expenditures vs. maintenance capital expenditures?

What is working capital and why is it so heavily negotiated in M&A transactions? Justin Thomas from Cohen & Company joined us for a deep dive into working capital to discuss how it is calculated and how it impacts the sale of businesses.1:03 - Working capital definition2:57 - How does working capital affect purchase price?6:12 - How does the market most commonly calculate working capital requirements?7:40 - Is working capital affected by a business's seasonality?9:19 - Example working capital calculation illustrating when it would positively or negatively impact purchase price12:23 - What is a working capital collar?13:46 - What items are most commonly miscategorized as working capital?15:18 - What is the goal of a working capital adjustment?17:18 - What is the most common reason for working capital adjustments?18:56 - How is deferred revenue viewed from a working capital perspective?

Financial and tax due diligence are a few of the many moving parts involved with selling a business. Most of the time, sellers provide buyers with plenty of financial data long before due diligence even begins. All the additional requests for information can seem repetitive, but financial and tax diligence is critical for both sides of a deal. We were joined by Justin Thomas, Partner in Charge of Transaction Services at Cohen & Company, to the financial and tax due diligence process and the purpose it serves for buyers and sellers of businesses. Among other topics, Justin covers:What information is requested during due diligence?What if a seller doesn't have the answers to financial due diligence requests?How long does financial M&A diligence take?What is a quality of earnings?How much does a sell side quality of earnings cost?What tax issues could delay a closing?I hope you find the interview useful and informative. If you have any follow up questions, or have a topic idea for a future podcast, please reach out to Chris Hren at [email protected]

We recently sat down with Harry Shimp, Senior Operating Partner at MCM Capital, to discuss his role at the firm and its portfolio companies and thought you might find it interesting. Among other things, Harry covers:Types of issues a CEO of a portfolio company should discuss with a senior operating partnerSetting the communication and reporting cadence between the portfolio company and senior operating partnerWhat management teams should expect from weekly calls with a senior operating partnerCharacteristics that make a potential portfolio company attractive to a senior operating partnerMaintaining a company's culture after a private equity acquisitionAdvice for business owners considering selling to a private equity firm

How does life at a family business change after being acquired by a private equity firm? We were recently joined by Marc Calcaterra, CEO of Torsion Group Corp, a manufacturer and distributor of garage door parts and accessories. In this interview, Marc discusses his discuss his experience working with a private equity partner since being acquired in 2016. Among other things, Mark covers:What caused Torsion Group Corp to seek a transactionWhy the company chose private equity over other deal optionsFears associated with partnering with private equityBenefits and challenges of working with private equity partnerReporting requirements under private equity ownershipDecision to retain equity in the business Advice for owners looking to sell their businessesBiggest difference between being family owned and private equity owned

We recently sat down with Mark Mansour, Founder and Senior Managing Partner at MCM Capital Partners, in an effort to shed some light on the fundamentals of private equity. In this interview, Mark discusses, among other things:Options for business owners seeking liquidity or an exit strategy and the advantages and disadvantages of eachAn overview of the private equity business modelHow private equity firms analyze a company's value and which characteristics play the largest role in the assessmentWhat a business owner should look for in a private equity partnerTypical reporting requirements to private equity partners for management teamsAdvice for business owners contemplating an exit

We sat down with Mike Tiner, COO of Andover Corporation, to discuss his recent experience in the private equity acquisition process. Just four months removed from Andover's sale, Mike covers the following topics, among others, from management's perspective: Whether to sell to management, a strategic, or a private equity firmWhat Andover was looking for in a partnerWhat to expect from due diligenceCommunication with employees during the sale processPreserving company culture post-acquisitionAdvice for owners considering a private equity exit strategy