This will tell you all you need to know about a company sale from both a buy side and sell side perspective

1. M&A Process Overview By Thomas McKeown

2. Introduction Definition and description of overall process The M&A market (The Acquisition Market) (P4) Financial /Strategic objectives in a M&A deal The benefits and risks of M&A

3. Summary Sales side Eight steps to closing a sale Seeking a financial advisor- areas and FA should have experience Assembling the deal team Legal counsel, accounting and actuaries Types of sales process Control led auction Target auction negotiated process Deal structuring Asset versus entity sale Taxes Premarketing Preparing the buyer list Preparing marketing materials- CA,CIM, Teaser, Bid process letter Actuarial appraisal and reserve review Comparing data room Marketing Initial contact with prospective buyer and follow up Preliminary bids and review Preliminary due diligence and strategy Data room strategy and management presentation Break out session strategy

4. Summary Buy side Evaluating the opportunity Pre screening the opportunity Retaining a buying side FA Review of opportunity Market analysis Preliminary valuation of target Financial modeling Preliminary due diligence Final bids Negotiation LOI Due diligence, deal financing, rating agencies Negotiation Analysis Management updates Purchase agreement Key conveyance Deal protection Employment agreements The path to closing Presentation to board of directors Regulatory issues, antitrust issues, SEC review Public announcement Shareholder approval and closing

5. Concepts and Purpose Merger- A combination of two or more companies in which the assets and liabilities and liabilities of the selling firm are absorbed by the buying firm. Acquisition- The purchase of an asset (I.E- plant, division, entire company). The M&A market- based on: Availability of financing-loan and debt & equity markets. Rising Stock Prices and rising P/E multiples- lead to higher cash flow. Ongoing restructuring Tax Implications Wealth transfer b/w generations Market Psychology Financial objectives in a M&A deal Strategic objectives The benefits and risks of M&A

6. Financial/Strategic Objectives Financial Objectives Strategic objectives Primary Objective- Promote Corporate Growth. Increase perceived future earnings. Expense Reduction Strategy- acquiring “orphan blocks” of life insurance. Revenue Synergies- Increased sales of different product lines. Improving the buyer’s long term competitive position by: Elimination of competition Gain access to more markets Creating economies of scale Leveraging Tech Gain share/pricing power Improving Distribution.

7. Financial/Strategic Objectives (continued) Horizontal vs. Vertical Integration Other Potential Objectives Horizontal Integration- acquisition of market share in a company’s existing competency (typically at the expense of rivals). Geographic Integration is part of Horizontal Integration. Vertical Integration- Gaining control over additional “links” in the value chain. Diversification- could lead to less volatile earnings. I.E) Variable annuities and fixed annuities are inversely correlated. Regulation Accounting and Tax Research & Development

8. Benefits and Risks of M&A Benefits Risks Can provide short/long term benefits to acquirer’s shareholders. This increased cash flow and drives up value of share holder equity. Can provide immediate strategic benefits- impractical to generate organically. Financial Risks- possibility of overpaying due to overly optimistic revenue synergies or cost savings. Strategic Risks- “channel conflict.” Execution Risk- everything goes right except integration.

9. The Sell Side

10. Eight Steps to Closing a Sale Preparing to Sell Pre-Marketing Marketing Review Preliminary Bids Due Diligence of Seller Final Bids & Negotiations Executive Definitive & Regulatory Filings Closing

11. Seeking and Acquiring a FA Strategic Alternatives- A financial Advisor (FA) is typically retained to formally review the seller’s options. The advantages to hiring an FA: An Investment Bank is impartial. Investment banks may present options management has not considered. They have insight into the most feasible as opposed to most desirable alternative. A FA should have experience in: the relevant industry or sector Valuation expertise Relevant M&A experience Financial structuring experience Strategic vision Process Prowess Negotiating skills

12. Assembling a Deal Team Senior Management time is scarce and valuable, efficiency is important. Coordination of efforts- Effective communication, generally done by FA Need to seek a Financial Advisor Legal Council- bids, contracts, agreements Accountants- “Quality of Earnings” report, taxes, employee benefits, risk management, IT. (Play a larger role on the buy side). Actuaries- Character of seller’s liabilities.

15. Maintenance of confidentiality

16. Limited approach to strategic buyers and broad approach to financial buyers

18. Highest degree of confidentiality

19. Limited number of strategic and financial buyers

21. Tax Issues How are gains calculated? Are there tax efficient ways to sell the business? Can buyer increase tax basis to reflect seller’s purchase price.

22. Pre- Marketing Preparing the Buyer List- FA provides list of qualified buyers.

24. Confidentiality Agreement(CA)- Between Seller and Potential buyer. The CA is intended to protect the seller from unauthorized sharing of information by the buyer. Upon agreement of the CA by the buyer, the seller sends the Confidential Information Memorandum (CIM).

25. Confidential Information Memorandum (CIM)- Primary document used to market to the seller. Describes seller’s industry, contains:

26. Executive summary

27. Key investment characteristics

28. Overview of Organization

29. Detailed historical and financial operating performance

30. Financial projections.

32. Ideally, this is completed before the formal marketing begins.

33. Compiling the Data Room

35. Follow-up with interested parties- issuance of CA, CIM, and bid process letter.

36. Reviewing Preliminary Bids- A FA must manage a seller’s expectations. FA and seller determines which bids go to a second round and which are excluded.

37. Preliminary Due-Diligence- Seller may invite one or more potential buyers to further negotiate based on strategy.

38. Due-Diligence- Must form proper strategy as acquirer’s spend significant amount of time analyzing seller’s business.

39. Data Room Strategy- FA of the seller must ensure information and technology is prepared for a smooth process.

40. Management Presentation- The seller’s opportunity to “tell the story.” Should provide key investment considerations and an overview of the operating and management history.

43. Market Analysis- evaluate short and long term potential for combined company.

46. Ascertain information needed to form meaningful bid

47. Protect itself from downside risks

48. Final Bids- As a result of Due-Diligence, Management decides whether to continue or not.

51. Management updates

52. Purchase agreement- terms of LOI plus numerous legal, financial, and operational contingencies.

53. Key covenants- pertains to matters over time

54. Deal protection- “no shop clause,” liability issues, intellectual property protection.