Most strategic buyers prefer to close their fold-in acquisition transactions in the first and second quarter of the year to take advantage of as much as the target's profits as possible. In addition to organic growth, fold-in acquisitions are used by companies to sustain growth in the following year's budget. Since most acquisitions, regardless of size, take about nine months to close, we can work backwards from quarters one and two in 2011 and estimate that we should see increased M&A activity in the second quarter of this year. We have been experiencing increased activity. We have gotten more calls from companies that are thinking about selling and are asking us to advise them in the sales process. The direct consequence for directors is that they will be busier than ever.
From an investment banker's point of view, directors can help the sales process by providing leadership before a transaction is contemplated.
First, how the company is branded in the minds of its employees and customers dovetails with how it wants to be perceived by potential buyers. For example, if you are branded as a content provider as opposed to an advertising agency, the company could attract a different class of buyers which might increase valuation.
Second, understanding the company's strategy and reviewing management's projections provides a basis to compare offers and helps in the decision to accept or not accept an offer, especially if the bid is unsolicited.
Third, board and management consensus as to acceptable valuation ranges eliminates non-serious contenders and helps manage expectations.
Fourth, having a PR program in place and providing oversight as the process unfolds allows a modicum of control of the information flow and gives comfort to employees and customers to help protect the company's current position.
Fifth, protecting management with retention and success rewards aligns their objectives with the board. In many cases while management would benefit financially, they might have different personal objectives and you wouldn't want them to derail the process.