How is a transaction generally structured?

It is important to stress there is no ‘typical’ transaction, each will be structured to suit the objectives of shareholders, as well as reflect wider market dynamics.

While there will be a focus on driving competitive tension and keeping momentum in the process, the aim is to achieve the best outcome for the client. Against this backdrop, however, there are several expected steps.

Agree on objectives: The first step is working with the seller to agree on objectives, with a focus on constructing a process that maximises the desired outcomes. Often a group of sellers may have different objectives, or may seek to preserve optionality. It is important that this is discussed early on to devise and tailor a process accordingly.

Potential buyers: Advisors will prepare an overview of potential buyers. This is important to determine how a process is structured in terms of information and time spent with buyers, depending on whether they are trade or private equity (PE). 

Prepare the business: Clearwater will work with the management team to prepare for a sale process. This can involve drawing up information internally, prepping the senior management for buyer discussions and working with the business to achieve key initiatives (such as bolt-on acquisitions), as well as developing marketing materials. 

Soft market: If deemed relevant, advisors will start to soft market the opportunity with the agreed buyer list. This may include informal meetings between senior leaders and potential buyers and is particularly valued by PE investors who may have less exposure to the sector and can put emphasis on building a relationship with management teams.

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Ultimately the transaction structure has to deliver for shareholders.

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Share materials: Once the business is ready for sale, advisors typically share agreed materials and set a defined period for offers. 

Offers: The sale process itself is usually structured across two rounds, with the intention of retaining momentum and competitive tension, while whitling the field down to parties that will ultimately meet and maximise shareholder objectives. Following receipt of non-binding offers advisors seek to select buyers who meet shareholder objectives, whether that be on value or structure, and again set a defined deadline for which to submit a binding offer. By only involving bidders who have demonstrated the right level of appetite, advisors can maximise tension and drive up value, while also creating a manageable level of disruption as sellers balance diligence processes

Final offers: The process culminates in a final offer, which can be the point of maximum tension and advisors will seek to drive the best outcome for the seller.

Role of an advisor 

For a sell-side transaction, we will work with shareholders to understand their objectives and consider current market dynamics, to tailor a process around the optimum transaction structure.

It is important any transaction structure ultimately delivers for shareholders and meets their objectives. As advisors, we aim to understand these objectives and work to create a structure that enables them to be maximised efficiently. 

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We don't hide behind jargon and complexity. Instead, we aim to open up the black box of M&A, illuminating the path with clear insight, simplifying the process, and delivering valuable information.