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Planning an M&A transaction is no small feat for CEOs. They have to gather a cost-effective, experienced deal team that can work together seamlessly.

Steve Siner, a chair at Hoge, Fenton, Jones and Appel, Inc., says it is important for company heads to first look at preexisting relationships when they recruit for banker, accountant, or attorneys. “As a CEO, I would go to a trusted person to select the remaining professionals in the deal team. I would let that person take the lead in choosing the team’s members because the person would have the contacts and networks and will be the one more involved with the transaction.”

Selecting the right professionals also requires an understanding of a company’s objectives for the transaction and each member of the deal team’s responsibilities. “It’s not a one-size fits all situation,” says Jonathan Babb, a partner at Sidley Austin LLP.Some transactions are critical to the growth and survival of the company while other deals are just a part of the company’s ordinary course of business. These situations can be very different and, in some cases, the relative importance of the matter versus expense may justify a smaller or larger team.”

Assembling the Troops

As soon as the decision to undertake an M&A is made, it’s time to bring the deal team together. Accountants, attorneys, company representatives, and bankers are typical players in these transactions; more recently, wealth managers and financial planners are also common participants. Depending on the specifics of the deal and industry, professionals with specific expertise might also be needed to complete the deal successfully. CEOs will benefit from knowing what each person’s specific role entails.

Legal Professionals (Attorneys)

More than any other part of the team, attorneys are essential to executing an M&A transaction effectively. They usually provide advice on deal structuring and securities law issues.

Lawyers are indispensible for drafting purchase or sales agreements for mergers as well as stock and asset sales. “There are critical legal issues that attorneys have to deal with such as indemnification and reps & warranties. There are also jurisdiction and venue disputes where applicable laws have to be determined depending on where the companies in an M&A deal are operating,“ Siner says.

The Newest Members (Wealth Managers or Financial Planners)

Unlike attorneys, wealth managers or financial planners were not always an integral part of the M&A team. But, in the past several years, M&A advisors have increasingly brought them in to advise business owners on what to do with the after-tax cash resulting from a company’s sale or financing.

“What I’m finding is because the current financial markets have less certainty, owners need a clearer idea as to what they are going to do with the cash, and how it fits into their financial plan,” says Kenneth H. Marks, a managing partner at High Rock Partners. “Before 2008, the market outlook for a balanced portfolio of stocks and bonds might realistically have been 8% to 9%. But, currently, that same portfolio is likely to return much less, being closer to 4% to 5%. In many cases, this drives up the owner’s need for after-tax cash from a transaction, thus increasing the ‘owner value’ or the value required by the owner to meet his or her needs.”

Financial Experts (Accountants)

While wealth managers help CEOs come up with ways to use the money from the deal, the accountants’ responsibilities are twofold: preparing the firm’s financial statements and giving tax advice.

These team members are in charge of getting financial records in order and ensuring they are compliant with generally accepted accounting principles (GAAP) prior to the letter of intent. “For both an M&A and financing process, the accuracy and credibility of the company’s financial information are essential. An accountant makes sure that a firm’s financial statements are solid and can be explained,” Marks says.

In a sale process, accountants are helpful because it is particularly important to understand, on a tax basis, what structure is advantageous to shareholders and how they are taxed when they get paid out.

Sometimes deal attorneys that have a tax background can serve as both the tax and legal professional on the deal. Tax services are usually the most cost-effective part of an M&A transaction.

Relationship Managers (Investment Bankers or Brokers)

Like accountants, investment bankers also provide an invaluable contribution to an M&A transaction. Whether they are on the buying or selling end, these team members play a vital role in the transaction’s valuation and funding.

“Investment bankers are the parties who deal with strategic buyers and private equity firms and their fees. They opine on issues such a deal’s market cap and how to structure price points in a transaction while comparing the pricing to other public deals,” says Hoge’s Siner.

Because they know the market, bankers are able to effectively present the transaction to prospective buyers and get the best quote on a deal. Additionally, they usually have a staff in place to address deal issues that arise during the process including indemnification and certain tax questions.

The Insiders (Board or Company Members)

Though external deal members matter, the insider input from board or company members is also a key part of the team’s success. Their involvement in an M&A transaction would depend on the size of the deal and who has knowledge of the company.

The CEO usually has to be part of the deal team. “You typically want buy-in from whoever has the power to approve and sell the deal to shareholders, typically the CEO,” Marks says.

In terms of shareholders and board members, inclusion would depend on who is pivotal in approving the transaction. From a fundraising perspective, the company might also have to bring in the CFO and other members of the management team (depending on how widely known the process is).

Additional Players

According to Sidley Austin’s Babb, consultants and other specialists might be brought in to assist with due diligence or other circumstances (environmental issues, employee benefit issues, etc.). Sometimes experts to handle specific regulatory, licensure, or industry issues are also brought in.

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