Free Mergers and Acquisitions For Dummies by Bill Snow Page B

to gauge whether both sides can play well together. Chapter 10 gives you the lowdown on these meetings.
    Step 8: Write or review the letter of intent
    If Buyer’s management has met Seller’s management as noted in the preceding section and is interested in making a firm offer, the next step is the vaunted letter of intent (LOI). The LOI is a nonbinding document that forms the basis of the final deal. It contains a specific purchase price (rather than a range) and provides the steps needed to close the deal. The LOI usually includes an exclusivity clause, which means Seller can no longer negotiate with other Buyers. Flip to Chapter 13 for details on making and receiving offers.
    Exclusivity is an enormous issue! Grant it carefully.
    Step 9: Perform due diligence
    When Seller accepts Buyer’s LOI (see the preceding section), the process moves to due diligence, where Seller discloses all its contracts, financials, customer info, employee info, and much more to Buyer. These days, the due diligence info is usually provided in a secure, online data room. Seller’s investment banker manages this process, which I cover more thoroughly in Chapter 14.
    Step 10: Draft the purchase agreement
    If due diligence (see the preceding section) is progressing reasonably well, the parties draft a purchase agreement. The purchase agreement is the final document, which means it’s the binding document (at long last!). The lawyers for Buyer and Seller work out the details of the purchase agreement; see Chapter 15 for more.
    When drafting the purchase agreement, make sure the lawyers hammer out the legal details and only the legal details. All of the business particulars should be handled by the investment bankers. Lawyers should never, ever, upon pain of death, negotiate a single business term! It’s not their job. Lawyers aren’t the deal-makers; they’re the people who make sure the deal-makers don’t agree to something illegal or unenforceable in a court of law. Business and legal issues are two separate worlds and each should be handled by the appropriate party.
    Step 11: Show up for closing
    When the parties are ready to wrap up the deal, both sides meet (usually in a lawyer’s office) to close the deal. It’s mainly a sign-this, sign-that kind of a day, much like the closing for buying a house. After all the documents are signed, the money is wired to the appropriate parties, and the deal is done! Chapter 16 provides more info on closing.
    Step 12: Deal with post-closing adjustments and integration
    After the deal actually closes, the real work begins: tying up the loose ends of the deal in the post-closing adjustments and integrating the acquired company into Buyer’s company. See Chapters 17 and 18 for more on how to do just that.
    For those of you who successfully complete the M&A process, there’s a special Step 13, a hidden track on the M&A CD, if you will: enjoying your success. One of the benefits of successful deal-making is the money, the wealth creation, and the self-actualization that comes from success. Before you think that’s merely a joyful ode to money making . . . well, okay, it is. But more than that, successfully doing deals means creating wealth and opportunities for others. A consummate deal-maker expands the economy as she improves her personal balance sheet. The best deals, where both sides make money, come from the value creation of hard work and ingenuity and the hardnosed ability to negotiate mutually beneficial deals. If you don’t believe that — if you can’t sleep well at night because engaging in M&A activities bogs you down with some sort of guilt — you may want to find a new line of work.
    Exploring Two Types of M&A Processes: Auction versus Negotiation
    The world of M&A breaks down into two large camps: negotiated sales and auctions. Although they’re similar (they both follow the same steps outlined in “Take Note! The M&A