Assessment & “New Client On-Boarding”:
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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:
- 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;
- 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;
- 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.
From the first day of our engagement, Cogent’s Outreach Team will begin gathering our list of potential candidates from our internal database and we’ll immediately begin contacting them. Our outreach efforts are very discreet and focused on initial identification and profiling through our available sources – you won’t know their names until they agree to an NDA, but you’ll know enough to decide if you want to meet them before we take that step.
Once identified, the Outreach Team attempts to contact the owner of the candidate company, trying to set a “discovery call” with one of the Partners here at Cogent, to chat executive-to-executive. If that first call goes well, and there is interest in a follow-up discussion, we’ll create an NDA with Cogent and schedule a “business review” call with a member of the Business Analysis Team. This most often provides the material we need to create a brief we can then review with you, to see if the candidate piques your interest, before moving to next steps.
Should you agree the candidate is worth meeting, we’ll submit a mutual NDA between you and the candidate, and once executed, we’ll make a formal introduction so that you and the candidate can set a
direct conversation to see if there is a “spark” of reciprocal interest to continue to next steps – like a first date. After that call we’ll contact the candidate to see what they think, then speak with you to compare notes. If all is “go” we keep moving forward.
The goal here is to see if more “dating” is warranted and if they are willing to provide the preliminary due diligence information we need to begin populating our candidate TAM™. While we are completing the candidate TAM™ we guide you on continuing discussions with the candidate geared toward developing reciprocal goodwill and trust, while exploring culture and fit, operations, sales and marketing, management, roles and responsibilities, etc., basically everything but “purchase price.”
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.
Are you already discussing a potential deal with another company? We can help get it done.
Cogent’s core mission is to help both sides execute a potential transaction while allowing the respective business owners to stay focused on running their business without getting bogged down in the M&A process. If you are already moving forward in a current deal, our services can be packaged as a “project” and we can still help you – from any starting point;
Regardless of your current progress, the Cogent team can still do what we always do for our regular clients by becoming the project manager and intermediary, working in cooperation with the principals (and advisors) on both sides, but doing all the heavy lifting from there. We’ll save you time and money while accomplishing the transaction most likely sooner than without us.
If you are still “kicking the tires” in preliminary discussions, we can engage and jump right in to help.
While that is underway we’ll spur myriad planned discussions amongst the deal parties about why these two companies should be combined in the first place, the various ways that might happen, and what the results of such a transaction might look like after closing.
Once completed, we’ll be ready to explore the results of the TAM™ and use it to create the mutually agreeable purchase price and deal structure that all parties can shake-hands on. (Which is nice. And, we sincerely wish that was all it takes to get a deal done – we really do – but there is a lot more work to do to get a deal closed that also has happy deal parties after closing -- which is our specialty).
and be ready to move to next steps. Once the LOI is signed, project management kicks-in to high gear, and we keep the process going.
Generally, we help all parties throughout the entire primary due diligence process – which can be daunting if not thoughtfully managed and executed – and help all parties with general consultation and advice as we draft the myriad transaction paperwork and negotiate the fine points, while also organizing due diligence materials and creating all the resulting briefs, reports and even the transaction schedules and exhibits needed, all as needed for a timely closing. Of course, you can let your other advisors do this work, and you can also do it yourself too, but click here to see what our customers say before you decide.
If you are further along in your current discussions, we’re able to jump in at almost any point in the process:
Then we can go step-by-step moving forward, parsing the project into phases; each with their own unique statement-of-work (“SOW”) and individual price based on overall deliverables and the various stages of services the deal parties wish us to provide.
We can offer the deal parties the benefit of our experience and help get things back on track, or cut the cord, instead of wasting time in limbo for the wrong reasons. With access to the deal materials, the Cogent team can swiftly make recommendations and create project specific SOW’s designed to help the deal parties make well informed decisions, so that the potential transaction can be concluded with a “pass” or a “closing.”