Win-Win

Buying or selling a business is not the same thing as buying or selling a property.

We succeed by helping our clients and candidates learn that buying or selling a business is not about winning battles in a war of attrition fought in the trenches by lawyers, accountants and advisors – like most think (and many are taught).

That might be an effective approach when buying distressed assets or real estate (property isn’t emotional), but when buying a perfectly good company, treating the owners, their employees and customers like “property” is just wrong, on every level; and something we never do.

We are skilled intermediaries who help both sides “win” throughout the deal timeline.

In our experience, the most successful transactions are accomplished by building reciprocal trust and goodwill amongst the parties, from the very first meeting, and throughout the due diligence and documentation process, all the way through to closing and beyond – we think of it more like dating that leads to a successful and lasting marriage. That’s one reason we get more IT Services deals done annually than anyone we know of.

Once we have an engagement agreement in place, we begin the on-boarding process by gathering due diligence about your company so that we can create our proprietary Transaction Analysis Model (“TAM©”), just like we would do for a candidate company, but with your information included so that we can accomplish a few objectives:

  1. By working with you to analyze your operational and financial information we can better understand your business from the inside out. This helps our team learn how to tell your story, so we can best represent you to potential candidates. We update this every six months while you are a client to keep it current, and;
  2. While reviewing the TAM© together, you will learn about the current state of your business from a third-party perspective, so that you and your team can discover areas of strength and things you can work on along the way, and;
  3. The TAM© will allow us to more easily teach you how and why our modeling works, using your own familiar information, so that when we create a TAM© for an acquisition candidate you will already have an understanding of all the various components and how it all pulls together -- and you will also have a good idea of what your own business is worth in today’s market.

While we are completing the TAM© we will be working with you to develop our “Candidate Mandates” that we use for the Outreach efforts. These will evolve as you evolve, but we do an initial version together as part of the engagement document process, so we can hit the ground running on signing. Once we complete the TAM© we update mandates, and perhaps make a few new ones, so that our Outreach team can be focused on what candidates will be most desirable.

We’ll use the candidate TAM© to develop structure and deal points with you in an interactive process where we show you how the Opportunity Delta© works, and that usually involves a bit of back-and-forth with the candidate to lock in a firm “hand-shake” before we draft the Letter of Intent (“LOI”) for approval – we believe it is better to know the LOI is reflective of the actual deal, rather than submitting a “term sheet” before knowing the details (that’s why we have such a high LOI-to-closing ratio).

Once the LOI is fully negotiated and executed, all parties know it is likely worth the time and effort required to bring the transaction to closing. Cogent then project manages the entire process, which is usually 8 to 10 weeks from LOI to closing -- it can go faster, or take longer, depending on circumstances and timely cooperation among the parties and their other advisors (attorneys, CPA, business counsel).

As the transaction proceeds post-LOI, Cogent will assign a project manager and dedicate select team members to the deal team, and we’ll open a project specific secure virtual data room (“VDR”) as the repository for all due diligence, transaction documentation and associated data. Most importantly; we do most of the heavy lifting in this phase, so the deal parties can focus on running their respective business and concentrate on continuing to build trust and goodwill via pre-integration planning together.

While we are not a law firm, and don’t give legal advice, we typically spearhead the creation of all the draft transaction documentation, using well-lawyered paperwork from our trove of previous deals as templates for the deals we do. We have years of experience working on myriad IT Services transactions, and we know how to make the lawyers for both sides happy (assuming they are willing, which is usually the case) and how to create fair and reasonable paperwork for both sides.

We are experts in IT industry specific transaction documentation and custom tailor each set to the specific deal points while spearheading negotiation of the fine points as the intermediary. While all parties start seeing them in writing for the first time – it is not our first time, which is why we are so effective at what we do.

While the paperwork is progressing Cogent’s business and financial analysts will be gathering and processing the post-LOI due diligence materials, creating the reports and briefs that the buyer will need to be able to close, while also helping seller work through all of the schedules and exhibits needed under the transaction documents, so that the deal can proceed to closing as well – all while keeping all parties on track as project manager.

We work with both sides, and in cooperation with respective counsel, to finalize and package everything for final review and signing, hopefully timing all of this to close on schedule. Our systematic processes and IT oriented transaction materials often save both sides significant money in professional fees.

While we are all working on getting the transaction ready to close, our project management timeline includes guidance and touch-points for both sides to work on pre-integration planning, as part of the process.

Employees, customers, vendors, systems, sales & marketing, etc., all need a pre-closing game plan so that the framework is ready to be more fully developed and finalized post-closing so that it can be executed in a phased timeline thereafter.

The same is true for operational and financial processes, procedures, technology and other logistics – but this can only be accomplished after closing once the whole team is combined and thinking as one team (the first goal, thinking as a combined team). Cooperatively building and refining the integration plan both pre and post-closing will help all the parties be well prepared to execute in stages as needed, while still successfully managing the businesses before they are truly synergistic, the day of closing forward.

The core concept of integration planning is to help ensure a smooth, orderly, and predictable transition, with as few surprises as possible. It will never be perfect, or go flawlessly, but the approach mitigates a fair amount of risk for both sides, while at the same time helping ensure that the core business remains as stable as possible throughout the post-closing integration time frame.

When the dust has mostly settled, and integration is fairly complete, the consolidating business, subsidiary company, or platform you have purchased simply becomes “the business.” At that point the business should be well positioned to begin leveraging its new scale, optimization opportunities, synergistic possibilities, while continuing to pursue incremental organic growth.

As the business begins to accrue the benefits from free cash flow, once again we turn our attention to acquisition opportunities. Thus, the Cogent Transaction Lifecycle begins anew.