What Is Life Like Under Private Equity Ownership?

Business Owner Interview: First 100 Days With Private Equity

What really changes at a company after being acquired by an outside investor? The answer largely depends on the acquirer. We interviewed Matt O'Donnell, founder of North Shore Commercial Door, on his experience selling his business to private equity backed strategic Torsion Group Corp. Matt discusses the timing of the transaction, some of the emotions he dealt with throughout the negotiation process, trying to juggle running the business while negotiating the sale, and gives some advice for business owners contemplating a similar transaction. 

1:50 - What made it the right time for Matt to sell his business?
3:15 - What to look for in a strategic partner
4:15 - Transitioning into his new role with Torsion Group Corp
7:08 - What emotions did he deal with throughout the negotiation process?
12:35 - His goals for the company and how partnering with a PE backed strategic will help serve those goals moving forward
15:40 - His experience running the day-to-day operations of the company while being immersed in the M&A transaction process
16:34 - Advice for business owners contemplating an exit and things he wish he'd known more about prior to entering into the negotiation process

For further discussion on the M&A process, please visit 
https://www.mcmcapital.com/private-equity-resource-guide-and-information/

Most Important M&A Negotiation Terms

What are the most important terms in negotiating the sale of a business? We sat down again with deal attorney Brent Pietrafese of Calfee, Halter & Griswold for a deep dive into legal due diligence. Among other things, we discuss:

• Protections business owners retaining minority stake in the new business should focus on during negotiations
• Most heavily negotiated terms in M&A transactions
• Key terms for entrepreneurs when negotiating a post-transaction employment agreement
• Non-compete clauses in acquisition documents and employment agreements
• Advice for business owners who may be negotiating the sale of their company in the near future

What To Expect From Legal Due Diligence

We interviewed Brent Pietrafese, M&A attorney from Calfee, Halter & Griswold LLP for an overview of M&A due diligence and what business owners should expect from this part of the transaction process.

• What legal specialty groups are involved in due diligence?
• What type of information is requested from a buyside legal team during due diligence?
• What if a business owner doesn't know the answer to a legal M&A due diligence question?
• Why is it important for a business owner to hire an attorney who's experienced in the M&A transaction process?
• How long does legal due diligence take and who from the company needs to be involved in the process?
• The importance of hiring a team of professional advisers outside of the organization to help with the sales process and due diligence 
• Best practices for business owners preparing for a legal due diligence process and most common issues that arise during due diligence
• What are the  most common factors that hold up a transaction during due diligence?
• Advice for business owners entering an M&A transaction beyond preparation and organization of documents

What Are Debt Covenants? M&A Banking Due Diligence Overview

We interviewed Kelly Lamirand, Senior Vice President at KeyBank to discuss what business owners should expect from Senior Lender M&A due diligence. Among other things, Kelly discusses:

• What information do senior lenders require when performing bank due diligence in an M&A transaction?
• Why do banks conduct due diligence?
• Common lending terms including revolver availability, cashflow recapture, and airball
• Discussion of the "5 C's of Credit," Character, Capacity, Condition, Collateral, Capital
•  What debt levels are senior lenders comfortable with from a total debt perspective and a senior debt perspective?
• What factors into the interest rate senior lenders charge? Does a bank's relationship with the private equity firm factor into pricing?
• What are debt covenants and what purpose do they serve?
• How do banks view growth capital expenditures vs. maintenance capital expenditures?

What To Expect From Financial And Tax Due Diligence

Financial and tax due diligence are a few of the many moving parts involved with selling a business. Most of the time, sellers provide buyers with plenty of financial data long before due diligence even begins. All the additional requests for information can seem repetitive, but financial and tax diligence is critical for both sides of a deal. We were joined by Justin Thomas, Partner in Charge of Transaction Services at Cohen & Company, to the financial and tax due diligence process and the purpose it serves for buyers and sellers of businesses. Among other topics, Justin covers:

• What information is requested during due diligence?
• What if a seller doesn't have the answers to financial due diligence requests?
• How long does financial M&A diligence take?
• What is a quality of earnings?
• How much does a sell side quality of earnings cost?
• What tax issues could delay a closing?

I hope you find the interview useful and informative. If you have any follow up questions, or have a topic idea for a future podcast, please reach out to Chris Hren at [email protected]