Quick Guide to Increasing Search Effectiveness

The Importance of SEARCH in M&A transactions

1 Finding the right PARTNER (Target/Investor) is the essence of any M&A activity

2 Tendency to take search listing lightly by Analyst/ teams

3 One bad shortlist can lead to a huge loss of time, money and resources

4 Huge strategic decision, substantial dollars at stake

SEARCH STAGES

STEP 1.  Understanding the Client Business and M&A Objectives

Understanding client’s business in detail

Product segment, customers, geography

Competitive landscape and deal activity. Understand the Client’s growth strategy (strategic buyer/seller raising capital)

Understanding client’s business in detail Understanding the M&A strategy

Where they want to grow?

How they want to grow?

How quickly they want to scale up?

What is necessary for growth – access to a market.

STEP 2.  Defining Search Strategy

Outlining Broad Search criteria

➢ Buy-Side ✓ Domestic/ Cross Border ✓ Which geographies may have the best Targets ✓ Revenue/ EBITDA/ Product/ Technology of Target

➢ Sell-Side ✓ Financial or Strategic investor ✓ If Strategic, then – domestic or cross border ✓ Define geographies for Search ✓ Financial strength/ history of M&A’s of buyer

Planning appropriate team – sector expertise, network, etc.

Defining strategy and prioritization – Buckets of targets, means to approach, timelines, etc.

STEP 3.  Compiling a List of Potential Targets/Investors (Long List)

Aligning search as per the defined criteria

Exploring all search resources

Intelligence in the team – industry experts, senior management, other team members

• Google
• Databases – CapitalIQ, PitchBook, regional databases like – VCCEdge in India, VAINU for Europe
• Industry Directories • Social Media (LinkedIn Groups, etc.)
• Orbit • Proprietary databases / AI

‘Key words’ are critical

Long lists need to be as vast as possible but linked to the defined criteria

Define the parameters to be captured as they can’t be added later easily

An attempt to define the quality of a longlist

Do’s:

Complies with the nature of the search (BO, Prospect, Mandate)

• Is in accordance with the payment proposal
• Is at the level of “leading midmarket M&A advisors”
• In accordance with quality and available company information in databases in a country

Don’t’s:

Not an extract from Capital IQ based on industry code

• Not a list any junior employee can produce
• Not a list without a senior person having looked at it

STEP 4.  Assessing Critical Parameters and Prioritizing Targets/Investors (Short List)

Data verification for ‘A’ category is recommended before reaching out

Members cooperation at this stage can lead to process efficiency

Personal bias plays a role and needs to be managed

ABC analysis has to be defined based on selected parameters

Synergy mapping is critical at this stage

News databases like Factiva, Bloomberg, etc. can provide useful insights

STEP 5. Reaching Out – Strategy and Best Practices

1. Leverage available resources in the following order (generally)

• Internal network of your organization
• External network – MAWW, Associates and Affiliates
• Social Media – LinkedIn, Twitter
• Cold Email and Cold calling
• Others – Trade Chambers, etc.

2. Cautiously follow up – Timing is important

3. Identify the right person to approach for M&A

4. Never say Never

In Summary:

1 – Knowledge of Databases is crucial for future success in the M&A process.

2 – The effectiveness of search increases by the involvement of senior people.

3-  The effectiveness of our network is highly dependent on the search so use each other’s databases and Search instructions.

4 –  Not only databases but also personal network, experience and industry knowledge contributes to high-quality search results.