Explain your reasoning
When someone purchases all of the shares in your company, your shareholders are really the ones at stake. You’re working on their behalf, so it’s your responsibility to not only derive the best deal for them but also to keep them apprised of the entire process.
“They had a completely different concern, which is: Was the value of the company and the process we were undertaking being maximized?” Margolis says. “We had to make sure that we were talking about and highlighting the value of the company. … You have to be very honest and straightforward about how the company is performing, about the market conditions you’re facing and about the actual process to create value for shareholders.”
First, shareholders are going to wonder why — why are you being acquired, why did you choose the private equity firm that you did, and, above all, why now?
Be prepared to share the thought processes, discussions and research that went into the decision. Margolis explained that the board began looking into unsolicited bids. Then, after brainstorming what potential acquirers might look like, the board went through both bankers and personal contacts to vet a mix of financial and strategic buyers.
He also told shareholders about the value presentations management made to interested bidders — after the fact, of course, because those happened unbeknownst to investors, employees or customers.
Shareholders will also wonder if they got a fair deal in the transaction. TriZetto’s investors received $22 per share, which represented a 29 percent premium over the 30 calendar day average of the closing stock price. The board worked with an investment banker to derive the maximum value. But in order to prove that you sealed a good deal, just explain the whole process that led up to it. It should speak for itself.
“What you need to explain to the shareholders then is how is this process conducted, about how many organizations did you talk to, why did we think now was a good time to entertain these offers, why did we think that $22 a share is a fair value for the company,” Margolis says.
Unlike your other constituencies, many shareholders will say goodbye after the transaction. So the best you can do is end on good terms. Margolis and his vice president of investor relations wrote personal letters to major shareholders and analysts after the deal closed.
“I thanked them for their support over the years,” he says. “I let them know that I looked forward to encountering them again in the marketplace, perhaps at some future time, and hoped that they were very satisfied with the outstanding outcome in terms of the value we created for them as shareholders.”
How to reach: The TriZetto Group Inc., (800) 569-1222 or www.trizetto.com