Successful Acquisitions:
A Director’s Role

As the highest governing authority within the management structure at any publicly traded company, the board of directors plays an essential role in determining a firm’s short- and long-term strategies. Key among strategic decisions, of course, is whether to merge or remain independent. Below are some of the important questions directors should be asking of top advisors before they approve or disapprove any merger or acquisition.

Key Questions to Ask…
        …of Management
  • Where does this acquisition fit within our overall growth strategy, and why?
  • What are the strategic reasons for acquiring this specific target? What factors will be critical to the success of this acquisition?
  • What are the metrics that will allow us to monitor progress toward that success?
  • What are our odds of acquiring this target? How do we improve the odds and remain disciplined?
  • Who are the target’s decision-makers?
  • How can we (board of directors) be helpful?
  • Who is the internal team dedicated to the acquisition process?
  • What advisors (legal, financial, other) will you use? Why are they appropriate for this assignment?
  • When should we bring advisors into the process? How do we minimize information leaks?
  • Will people developing/approving the target forecasted results be responsible for delivering those results?
  • How does the acquisition stack up against alternate uses of our capital?
  • Are we better off buying back our own stock? Paying a dividend? Paying down debt?
  • Do we have the financial and human resources required to be successful? If not, how do we get them and what are the costs and risks?
  • Why are we using our stock? Alternatively, why are we not using our stock?
  • What concerns have the acquisition team surfaced? Has top management personally considered and adequately resolved those concerns?
  • Can you describe the due diligence process, including development of the program, execution and responsible personnel? Can you describe the review and sign-off process?
  • How will management monitor the integration process and what periodic feedback can the board expect along the way?
  • Who is our negotiating team?  Do we have seasoned individuals, industry experience and target company knowledge resident in the team?
  • What is your expected acquisition price range? Can you defend the upper end of that range?
  • What are the pro forma financial impacts at that price?  Do we require synergies to be EPS neutral?
  • What are the critical terms in the agreement and why?
  • Are we progressing to plan on the integration?
  • Please review progress against "critical success factors."
  • If we are off plan, what are the ramifications, what can be done?

Key Questions to Ask…
        …of Financial Advisors

Key Questions to Ask…
        …of Legal Advisors
  • Who comprises the engagement team?
  • Who will be at the negotiating table on our behalf?
  • What is a fair value range for the target?  Provide analyses to support your answer.
  • How do we best protect our acquisition?
  • Who are our likely competitors and how much are they likely to pay?
  • If we use stock as acquisition currency, how do we protect our shareholders against the price becoming too high?
  • If we use cash how can we assure financing certainty and what will it cost?
  • How will the public equity markets (debt markets) view this acquisition?
  • How do we bring in our financing sources while minimizing leaks?
  • What are our duties as directors in an acquisition scenario?
  • How much can we rely on our experts?
  • Do we need a fairness opinion?
  • With respect to this specific transaction:
    • What are the summary results of your legal review?
    • Do we have areas of legal/litigation exposure?
    • Have we taken advantage of all available structuring means to shelter our company from exposure to liabilities?
    • What is the process and expected timetable for regulatory approvals (SEC, FTC, foreign agencies, etc.)?

What are the six parameters that determine success in an acquisition or merger?

1. Capital allocation discipline
2. Strategic rationale - selecting the right target
3. The acquisition team
4. Assuring adequate process and due diligence
5. Negotiating acceptable terms and conditions
6. Successful integration

Relational Advisors specializes in mergers and acquisitions, private financings, shareholder matters, restructurings and crisis situations for clients ranging from middle market companies to the Fortune 500.  Since the firm’s inception in 1988, Relational Advisors has executed numerous transactions for its clients totaling more than $60 billion.

Relational Advisors LLC
12400 High Bluff Drive, Suite 600
San Diego, California 92130
Telephone 858-704-3300