Middle Market Mergers and Acquisitions by Colonnade Advisors MM M&A 007: Striking a Deal - Price & Terms
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Sep 14, 2020 In the world of mergers and acquisitions, pricing is just the tip of the iceberg. Key distinctions between stock and asset sales can significantly impact tax implications and buyer motivations. The conversation dives into transaction considerations, including cash versus stock proceeds and the importance of upfront payments versus contingent ones. Personnel issues are also crucial, as they affect the smooth transition post-acquisition. Finally, keeping an eye on the certainty to close ensures timely deals, making every detail vital for success.
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Peg The Balance Sheet Carefully
- Negotiate a cash-free, debt-free peg and a working capital target so the buyer receives an operable company.
- Make sure the peg leaves enough cash to cover immediate obligations on day one.
Stock Vs Asset: Tradeoffs Matter
- Sellers generally favor stock deals while buyers prefer asset deals for liability control.
- The tax and risk trade-offs drive structure; consider basis step-ups and shared tax savings.
Talk To Your Tax Advisor Early
- Consult tax advisors early to model outcomes for stock versus asset scenarios and net proceeds.
- Run numbers before locking to understand post‑tax cash to sellers.