Middle Market M & A
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Middle Market M & A : Handbook for Investment Banking and Business Consulting

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Description

In-depth coverage in a single handbook of the middle market based on the body of knowledge of the Certified M&A Advisor credential program M&A advisors have an unprecedented opportunity in the middle market with the generational transfer of wealth and capital being deployed by private equity and corporate investors. Middle Market M&A: Handbook for Investment Banking and Business Consulting is a must-read for investment bankers, M&A intermediaries and specialists, CPAs and accountants, valuation experts, deal and transaction attorneys, wealth managers and investors, corporate development leaders, consultants and advisors, CEOs, and CFOs.
* Provides a holistic overview and guide on mergers, acquisitions, divestitures and strategic transactions of companies with revenues from $5 million to $500 million * Encompasses current market trends, activities, and strategies covering pre, during, and post transaction * Addresses the processes and core subject areas required to successfully navigate and close deals in the private capital market * Includes content on engagement and practice management for those involved in the M&A business This practical guide and reference is also an excellent primer for those seeking to obtain their FINRA Series 79 license.
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Product details

  • Hardback | 400 pages
  • 153 x 233 x 33mm | 620g
  • New York, United States
  • English
  • 1. Auflage
  • 0470908297
  • 9780470908297
  • 912,918

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Middle Market M & A

Handbook for Investment Banking and Business Consulting

Providing a holistic overview and guide to mergers, acquisitions, divestitures, and strategic transactions for middle market companies, Middle Market M&A covers pre-transaction planning, deal execution, and post-transaction considerations, addressing the processes and core subject areas with the practical and street-smart acumen required to successfully navigate and close deals in the private capital market.

Drawing from their combined decades of experience, authors Kenneth Marks, Robert Slee, Christian Blees, and Michael Nall, along with contributors from the Alliance of Merger & Acquisition Advisors(R) (AM&AA) community, share an abundance of insights to reveal the foundation to understanding the middle market. With straightforward direction about the trends and activities you will encounter, you'll find the essential strategies and tips you'll need before, during, and after the deal.

Middle Market M&A explores: Characteristics of the middle market and the private business owner A practical view of market valuation and deals Corporate development applied to the private capital markets Advantages--and challenges--of cross- border M&A Financial analysis and modeling Sell-side/buy-side representation Structuring and financing transactions Tax provisions used in M&A Strategic and tactical due diligence Regulation and compliance M&A concepts and deal slang

Middle Market M&A is based on the body of knowledge of the industry-leading benchmark credential, the Certified M&A Advisor(R) (CM&AA) Program, and is an essential reference for advisors, leaders, and executives involved in the life cycle and process of M&A transactions.
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Back cover copy

Middle Market M&A

Providing a holistic overview and guide to mergers, acquisitions, divestitures, and strategic transactions for middle market companies, Middle Market M&A covers pre-transaction planning, deal execution, and post-transaction considerations, addressing the processes and core subject areas with the practical and street-smart acumen required to successfully navigate and close deals in the private capital market.

Drawing from their combined decades of experience, authors Kenneth Marks, Robert Slee, Christian Blees, and Michael Nall, along with contributors from the Alliance of Merger & Acquisition Advisors(R) (AM&AA) community, share an abundance of insights to reveal the foundation to understanding the middle market. With straightforward direction about the trends and activities you will encounter, you'll find the essential strategies and tips you'll need before, during, and after the deal.

Middle Market M&A explores: Characteristics of the middle market and the private business owner A practical view of market valuation and deals Corporate development applied to the private capital markets Advantages--and challenges--of cross-border M&A Financial analysis and modeling Sell-side/buy-side representation Structuring and financing transactions Tax provisions used in M&A Strategic and tactical due diligence Regulation and compliance M&A concepts and deal slang

Middle Market M&A is based on the body of knowledge of the industry-leading benchmark credential, the Certified M&A Advisor(R) (CM&AA) Program, and is an essential reference for advisors, leaders, and executives involved in the life cycle and process of M&A transactions.
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Table of contents

Preface xv Acknowledgments xix PART ONE The Middle Market 1 CHAPTER 1 Private Capital Markets 1 Segmented Markets 4 Why Are Markets Segmented? 7 Capital Providers 9 Owners' and Managers' Views of Risk/Return 10 Buyers 11 Market Activity 14 CHAPTER 2 Valuation Perspectives for the Private Markets 17 Private Business Valuation Can Be Viewed through Different Standards of Value 18 Market Value 21 Fair Market Value 22 Fair Value 22 Incremental Business Value 23 Investment Value 23 Owner Value 23 Collateral Value 23 Book Value 24 Why the Different Versions of Value? 24 Valuation as a Range Concept 25 Value Worlds and Deals 26 An Alternative Valuation Approach 26 CHAPTER 3 Corporate Development 27 Why Acquire? 28 The Dismal Ds 29 Alternatives 30 The Acquisition Process 31 The Pipeline and Filter 32 Approaching the Target 33 The Balance between a Deep Dive and Locking In the Deal 34 Lower-Middle Market versus Middle Market Deals 34 Valuation from a Strategic s Perspective 35 Structuring the Transaction 37 The Bid 38 Due Diligence 38 Integration 41 Case Study #1 42 Strategic Rationale 42 Challenges 43 Transaction 44 Lessons Learned 44 Case Study #2 44 Practical Tips and What Causes Deals to Fail 47 What Should We Acquire? 47 Why Are We Doing This? 48 Alignment of Interests 48 Allocate Enough Resources 49 If It Can Go Wrong, It Will Go Wrong 49 CHAPTER 4 A Global Perspective 51 Advantages of Global M&A 52 Challenges to Global M&A 52 Negotiations and the Importance of Cultural Tune-In 55 Strategic Due Diligence 56 Postmerger Integration: Are the Odds in Your Favor? 59 From the Start: Think Integration 61 Acquisitions that Build Value 62 1. Set Clear Expectations and Invest in High-Quality, Two-Way Communication 63 2. Acknowledge Cultural Differences but Simultaneously Create a Common Corporate Culture with a Single Goal: Achieving High Performance 64 3. Move to a Cross-Border Operating Model 65 The Legal Environment and the Acquisition Process 66 The Legal Environment and the Conduct of Business 67 Taxation 68 Labor 68 Foreign Corrupt Practices Act (FCPA) 69 Success Factors 70 PART TWO The M&A Practice and Processes 71 CHAPTER 5 Practice Management 73 Primary M&A Advisors 74 Marketing the M&A Practice 76 Networking 76 Marketing and Advertising 77 Pretransaction Consulting 77 Valuation Services 77 Other Consulting Services 78 Becoming an Expert 78 Understanding the Private Business Owner 78 Client Acceptance 79 Initial Financial Analysis 82 Value Discussions 82 Process Discussions 82 Confidentiality 83 Client Engagement 84 Identification of the Parties 85 Scope of Service 85 Limitations and Disclosures 86 Fees 86 Double Lehman Formula 87 Termination and Tail 88 Licensure Issues in the M&A Business 88 CHAPTER 6 Sell-Side Representation and Process 91 Selling Process Overview 91 Step 1: Data Collection 92 Step 2: Industry Research and Identifying Buyer Types 94 Step 3: The Marketing Book 95 Step 4: Marketing Process 99 Step 5: Negotiating Price and Terms 102 Step 6: Structuring the Transaction 106 Step 7: Receiving Letters of Intent or Term Sheets 109 Step 8: Due Diligence 111 Step 9: Definitive Agreements 112 Step 10: Closing Process 114 CHAPTER 7 Buy-Side Representation and Process 117 Strategy 117 Engagement and Fees 119 The Filter 119 Financing 120 Quality of Earnings 120 Coordination 122 Integration 122 CHAPTER 8 Mergers 123 Initial Analysis of Both Entities 123 Strategic Rationale 124 Valuation Modeling 125 Understand Cost, Operational, and Cultural Differences 125 Develop the Integration Plan 127 Deal Structure and Negotiations 127 Due Diligence 128 Legal Process and Closing 129 Postclosing Integration 130 CHAPTER 9 Professional Standards and Ethics 131 Role of the M&A Advisor in the Economy 132 A Whole New Way 133 The Middle Market Standard 134 Ethical and Professional Standards 134 Competence and Professionalism (Reputation) 134 Best Practices (Activities) 135 Ethics (Behavioral Boundaries) 135 Country Specific (Customs) 136 PART THREE M&A Technical Discussions 137 CHAPTER 10 Financial Analysis 139 Financial Reporting Motivation 139 EBITDA 140 Balance Sheet Analysis 142 Working Capital 142 Normalization 148 CHAPTER 11 Deal Structure and Legal Documentation 151 Attorney's Role 151 Preliminary Legal Documents 153 Confidentiality Agreement 153 Letter of Intent 154 Structure of the Deal 155 Stock Sale/Merger 155 Asset Purchase 157 Section 338(h)(10) Election in a Stock Sale 160 Purchase Price 160 Consulting and Employment Agreements 161 Due Diligence 161 Acquisition Agreements 161 Representations and Warranties 162 Qualifications to Representations and Warranties 163 Indemnification 163 Earnouts 164 Parameters 165 Benefits of Earnouts 165 Shortcomings of Earnouts 165 Regulatory Compliance 166 CHAPTER 12 Tax Structure and Strategy 168 Tax Fundamentals 168 Transaction Tax Basics 172 Asset Transactions 172 Stock Transactions 174 Stock versus Asset Sale Example 175 Negotiations Based on Structure 177 Asset Transaction Details 179 Buyer Tax Issues 185 Tax Glossary and Reference 188 CHAPTER 13 Tax Provisions Used in M&A 193 Installment Sales 193 Risk of Forfeiture 194 Assets that Qualify for Installment Treatment 194 Installment Planning Opportunity 195 Section 1031 (Like-Kind) Exchanges 196 Third-Party Exchanges 196 Partnership M&A 196 General Partnership Doctrine 197 Partnership versus S Corporation 197 Partnership Gain Tracking Rules 200 Purchase Price Allocation for Partnership Buyers 200 Corporate M&A Issues 201 Contributions to Corporations 201 Mergers and Reorganizations 202 Net Operating Loss Limitations 206 Stock/Asset Sale Election: Section 338 206 S Corporation Issues 208 Tax Glossary and Reference 210 CHAPTER 14 Regulation and Compliance 215 Protecting Investors: Securities Act of 1933 215 Exemptions under the 33 Act 216 Commonly Used Private Placement Exemptions 217 Keeping the Markets Honest: Securities Exchange Act of 1934 219 Requirements and Rules 219 Williams Act 220 Antitrust Issues and Laws You May Encounter in the Deal 221 Hart-Scott-Rodino Act 221 Specific Industries 222 Exon-Florio 223 Other Regulatory Issues and Laws You May Encounter in the Deal 223 Bulk Sales Laws 223 The WARN Act 224 The Investment Banker's Perspective 224 SEC Provisions for Broker-Dealers 225 Investment Advisers Act and Investment Company Act of 1940 226 FINRA Provisions for Broker-Dealers 227 The Company s Perspective 227 Process of Issuing and Selling Securities in the Deal 227 State Blue-Sky Laws 228 Considerations for Public Companies 229 CHAPTER 15 Financing Sources and Structures 231 Perspective 231 Buyouts 232 Buyout Deal Structure 234 Bridging the Valuation Gap 237 Recapitalization 237 Acquisitions 237 Financing Primer 239 Capital Structure 239 Factors Shaping the Capital Structure 243 Sources and Types of Funding 246 Debt 247 Private Equity 249 Personal Guarantees 251 CHAPTER 16 Due Diligence 255 Traditional Due Diligence 255 Financial Matters 257 GAAP Compliance 259 Tax Impact and Compliance 260 Compensation and Benefits 262 Legal 263 Information Technology 264 The Diligence Team 265 Due Diligence Process 266 Public versus Private 266 Impact of Globalization 267 Who Relies on Due Diligence? 267 Quality of Earnings 268 Financial Statement Audits 268 CHAPTER 17 Market Valuation 271 Reasons for Appraisal 272 Determine the Value Subworld 272 Calculate the Benefit Stream 273 Synergies 279 Determine Private Return Expectation 281 Specific Investor Return 282 Industry-Specific Return 284 General Investor Returns 284 General Acquisition Selling Multiples 284 Derive Value 285 Global Perspective 289 Epilogue for Business Owners 291 Appendix 297 Transaction Examples 297 Transaction Valuation 298 Tools, Models, Resources, and Templates 299 Glossary 301 Notes 337 About the Authors 343 About the Contributors and Reviewers 347 Index 361
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About Kenneth H. Marks

KENNETH H. MARKS, CM&AA, is founder and a Managing Partner of High Rock Partners, Inc. He is the lead author of The Handbook of Financing Growth: Strategies, Capital Structure, and M&A Transactions (Wiley). He has been involved as management, advisor, and board member with many emerging growth and middle market businesses. ROBERT T. SLEE, CM&AA, is Managing Director of Robertson & Foley, a middle market investment-banking firm. He has published over 100 articles on private finance topics in a variety of legal and business journals. He is the author of Private Capital Markets (Wiley). CHRISTIAN W. BLEES, CPA, CM&AA, is President and CEO of BiggsKofford PC, directing several sectors of the business including the firm's merger, acquisition, and sales practice. He has been involved in over 200 middle market M&A sales transactions. MICHAEL R. NALL, CPA, CM&AA, is founder and CEO of the Alliance of Merger & Acquisition Advisors, a Chicago-based professional trade association featuring a resource and development center serving more than 600 independent accountants, attorneys, and business advisors. He is an author and recognized speaker on valuation, growth, and sales of middle market companies.
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