CFOs, Bankers On M&A Site Visit Dos & Don'ts
Experienced CFOs & investment bankers explain their key dos & don'ts for site visits during mergers & acquisition due diligence. Get Ansarada's M&A tips here.
By ansaradaThu Apr 07 2016Due diligence and dealmaking
Site visits are obviously an important part of M&A due diligence, but sellers should not treat them as merely a tick-the-box exercise. To do so invites trouble.
So what are some unsightly traps to avoid when bidders knock, literally, on the door?
Firstly, when planning a site visit, you should be quite certain that the bidder is very interested in acquiring the business. If not, you could scare the employees, disrupt business and kick-start a whispering fear campaign. By minimising bidders to the “we’re certain they’re very interested” category, you also minimise the number of bidder groups wandering about the site (and wondering about the site). Always a scary look for employees.
The visit needs to be a meticulously planned event, not a ‘hey, pop round anytime’ barbecue-like shindig. You need to advise bidders of strict protocols relating to how many people can come on site, and what they can wear. You don’t need swarms of Gordon Gekko types in pinstripe suits pouring into your manufacturing plant. This would raise questions. Better to have them dress as a potential customer group would. It has to be a better fit for the environment.
Preparation is crucial. You’ll need to be able to communicate with employees why there are strange people wandering around, and provide your senior management with messaging so that if employees do ask questions, they have an appropriate response ready.
You’ll also need to schedule site visits with the bidders on different days to ensure they don’t cross paths.
The site visit is usually accompanied by a management presentation, allowing bidders the opportunity to sit down with the C-suite and have an in-depth conversation about the information they’ve collected in the data room and what’s in the offer memorandum.
But be clear. The site visit and presentation should be given a strict time limit, with the content, go, and no-go points clearly articulated beforehand. In Hollywood they make it clear from the start: “We will not be talking about Mr Affleck’s first wife”. It’s ok up front to say that bidders can ask questions, but you reserve the right not to answer them. However, if you don’t make that clear up front, it may look like you’re being evasive later. A confident demeanour sends its own message.
It’s here that the role of the advisor is so important. They need to plan the site visit within the context of an overarching communication and messaging strategy. The timing, communication statement, who gets on site and other factors all need to be taken into account. The advisor also needs to be perceptive enough to intervene if a line of questioning or answering may lead to an unwanted outcome, either legally or in terms of share price impact.
One way to stop a meeting becoming a train wreck is to rehearse. A tight team should be gathered and put through its paces. The advisor can play devil’s advocate – the bad bidder, the good bidder or the bidder that gives nothing away. A rehearsal also limits the possibility of off-script moments such as where an employee might try to impress the bidder (potentially their future employer), or a CEO or CFO being caught off guard by an unreasonable line of questioning. This is all great preparation, and a nerve-calmer come crunch time.
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