Receiving an unsolicited offer can present an array of challenges for companies, especially for family- and founder-owned businesses. On one hand, such offers may signal recognition of the company’s value. On the other, an offer can create uncertainty regarding the future direction of the business. Companies must grapple with several specific concerns: valuation ambiguity, confidentially issues, unforeseen shareholder or family dynamics, disruption of business operations, potential board involvement, competitive pressures, and negotiation complexity, to name a few. Navigating these challenges requires a strategic approach. This is where engaging an investment banker proves to be invaluable.
Valuation expertise is a cornerstone of the investment banker’s role. They can accurately assess the unsolicited offer against the true market value. This involves employing sophisticated valuation methods and market analysis, ensuring that the shareholders are well-informed and prepared to negotiate effectively. A thorough understanding of the company’s worth enables management to avoid potential pitfalls during a buyer’s due diligence process.
Investment bankers are experts at maximizing the deal’s value, whether through securing a higher price or negotiating more favorable terms in a letter of intent. Their experience in managing a competitive bidding process can be vital, as they can identify and approach other potential buyers to create a more advantageous position for the company.
Investment bankers also provide crucial market knowledge. Their insight allows them to determine if the unsolicited offer is aligned with current market conditions and identify opportunities that may not be immediately apparent to the seller.
Confidentiality and effective process management are additional advantages. Investment bankers will ensure, to the extent possible, that the deal process remains discreet, protecting sensitive information while coordinating due diligence workstreams. This meticulous oversight enables a smoother, more efficient buyer due diligence process, which typically has a duration of 60-90 days.
Moreover, the objective perspective provided by investment bankers can be critical during a transaction process. They offer unbiased advice, enabling sellers to make informed decisions based on market realities rather than emotional responses.
Finally, an investment banker can assemble a collaborative deal team of transactional accountants, attorneys and tax advisers, ensuring that all aspects of the transaction are comprehensively addressed. This not only mitigates risks but also enhances the likelihood of a successful closing.
M&A Market Activity
Deal volume within the U.S. increased by 3.6 percent when comparing September 2024 to the same month in 2023. Similarly, disclosed deal value within the U.S. expanded by 3 percent when comparing Q3 2024 YTD to the same period in 2023.
Similarly to the broader U.S. market, deal volume within the Pittsburgh M&A market increased in September 2024 by 9.1 percent when compared to September 2023. The Pittsburgh region saw several noteworthy transactions for September 2024, which includes acquisitions from several Pittsburgh-based companies: Guttman Holdings, Pinnacle Consulting & Recruitment, Confluence Wealth Services, Limbach Holdings and Incline Management.
Evan Lyons is a Vice President with MelCap Partners, LLC, a middle-market investment banking advisory firm. For more information on MelCap Partners, please visit www.melcap.com or email [email protected].
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