HOW TO ENSURE A DEAL TEAM’S SUCCESS: In a fast-paced deal market, it is critically important to build a strong, well-coordinated deal team.

In the article below, “Deal Considerations for New Acquirers: Managing an M&A Dream Deal Team,” Jeffrey A. Beuche reviews the basics, supplying practical observations and suggestions for defining the characteristics critical to success when organizing an M&A deal team.

Jeff Beuche is an attorney in the corporate group of Faegre & Benson, one of the largest firms in the Rocky Mountain region. The firm regularly handles among the most complex and challenging transactions and litigation work facing multinational businesses.

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Active FOCUS Deals

• Asset Management
• BioScience
• Building Materials
• Business Process Outsourcing (multiple assignments)
• Business Services
• Call Center Software and Services
• Construction (Infrastructure)
• Consulting
• Distribution
• Electrical Transmission Equipment
• Financial Services
• Food Processing
• Food Service Management
• Government Contracting (multiple assignments)
• Healthcare Business Services
• Home Automation
• Information Management
• IT Outsourcing (multiple assignments)
• IT Services (multiple assignments)
• Library Services
• Leisure
• Manufacturing
• Maritime Shipping
• Market Research
• Media
• Medical Devices (multiple assignments)
• Medical Diagnostics
• Medical Staffing
• Security
• Software (multiple assignments)
• Sports Apparel
• Transaction Management Services
• Truck/Transport Capital Equipment

Our transaction process provides us with up-to-the-minute market knowledge in these sectors. Are any of them of corporate development interest to you? Give us a call or drop us a note.

Inquiries should be addressed via e-mail to info@focusbankers.com, by telephone to 202-470-1973 or by fax to 202-785-9413.

FOCUS Closes Tenth and Eleventh Transactions of 2006:

BMS Holdings S.A. Has Acquired BMS and BOCS with a Senior Secured Debt Facility from Dexia Bank

FOCUS initiated the Leveraged Management Buyout (LMBO) and acted as the advisor to BMS Holdings S.A., and lead arranger in its LMBO of BOCS and BMS. The transaction was financed with a debt facility from Dexia Bank. Details of the transaction were not disclosed. BOCS and BMS were established in 1974 in Antwerp, Belgium with "Belgian Overseas Chartering and Shipping N.V." (BOCS) acting as the exclusive agent for "Breakbulk Marine Services Ltd." (BMS), the operating company, based in Guernsey, of the Channel Islands. Dexia Bank was born out of the 1996 alliance between two major European banks: Crédit Local in France and Crédit Communal in Belgium. For more information, go to http://www.focusbankers.com/tombstones/deal_BOCS.asp

Caretek, LLC to Provide Expansion Capital for Blue Canopy

FOCUS acted as financial advisor to, and assisted with the negotiations as the representative of Blue Canopy, a privately held company, and a pioneer and thought leader in managing and deploying technology initiatives. The company’s impressive customer base includes leading Public Sector Agencies, Fortune 1000, and Global 2000 firms. During the year 2005, Blue Canopy recorded revenues of approximately $12 million. Caretek, LLC is a private entity owned by Bradley J. Schwartz. Prior to joining Blue Canopy, Mr. Schwartz held several positions with KPMG Consulting and BearingPoint. For more information, go to http://www.focusbankers.com/tombstones/deal_BlueCanopy.asp

Deal Considerations for New Acquirers: Managing an M&A Dream Deal Team

By Jeffrey A. Beuche, Faegre & Benson LLP, Denver

There has been a resurgence of domestic and international mergers and acquisitions activity and with it comes increasing pressure on business development people, investment bankers, accountants and attorneys to get deals done quickly. In a fast-paced deal market, building a strong deal team — and making certain that the team is well coordinated — is vitally important. A well-coordinated team is more efficient, which results in lower transaction costs, and less likely to make mistakes that can sink the deal. Open communication, definition of role and efficient information sharing are critical from the get-go. So is taking the time to make sure all members understand the purchase agreement terms. The team must work together through due diligence, negotiation and execution of a purchase agreement, any regulatory consent processes and conditions to closing, interim operations, and finally, closing and transition and integration.
Here are suggestions to consider when organizing an M&A deal team and leading it through the front end of an acquisition, in particular, due diligence investigations and purchase agreement negotiations. Although this discussion is focused on the buyer’s deal team, many of the concepts are applicable to sellers as well.

The Due Diligence Process

Coordination of the deal team is critical before and during the due diligence process. Without effective coordination, team members may duplicate efforts, devote too much time to insignificant matters and not enough to key issues, or fail to drill down on key issues on the assumption that others are investigating them. These problems can be avoided by assigning roles, highlighting key areas for investigation and defining the scope of review and desired output. Moreover, a well-coordinated team will make for better relations with the other party by avoiding unnecessary or duplicate requests for information and by conveying follow up requests in an organized and systematic manner.

The due diligence team should consist of appropriate business, financial and legal representatives and, when necessary, subject matter experts. To promote efficiency and consistency of work product, the team should be kept to the minimum number necessary to complete the investigation within any applicable time constraints.

Team members need enough information to understand the business being acquired, the purpose and structure of the transaction and value drivers. Most important, team members need to know the objective of their investigation. It is rarely effective to ask team members to perform an “exceptions review” of diligence information or to “just look for big issues.” Typically, establishing the substance of contract summary forms, site visit checklists and similar roadmaps for the investigation in advance will streamline the process and ensure that critical data is captured. Team members also need clear instructions about the scope of their investigation and who is responsible for each area of review. Creating detailed task lists addressing each aspect of the investigation and the responsible parties is often helpful.

Once the investigation is complete, the team’s challenge shifts to consolidation and presentation. Due diligence investigations generate a flood of information that is not ultimately significant to the deal terms or negotiations. Meticulously drafted diligence reports are of little value if the information is not utilized in the purchase agreement negotiations. One or more team leaders representing business, financial, legal or other areas should review and synthesize the output received from other team members. The group should identify any areas requiring further investigation, any issues critical to the decision to proceed with the deal and the final determination of the purchase price, and any issues to be addressed in other purchase agreement provisions. This process helps ensure that decision makers and negotiators are armed with critical data without being overwhelmed with unnecessary information.

Purchase Agreement Negotiations

The purchase agreement in an M&A deal is often 50–100 pages and usually contains purchase price adjustment mechanisms, representations and warranties and risk allocation provisions that can have a substantial effect on the economics of the deal. Too often, deal makers disengage from the process once they’ve agreed on price. It is critical that the deal team understand the operation of the purchase agreement and the impact of its terms and conditions on the business deal. We have found that working through real examples with the deal team, while sometimes tedious, is the best way to accomplish this.
For example, the purchase price is frequently subject to a closing date working capital adjustment. The parties must understand and agree on the components of the adjustment mechanism. How are “current assets” and “current liabilities” defined? Do aged accounts receivable get discounted? How is slow-moving inventory valued? It is worthwhile to have the deal team run a model purchase price adjustment using anticipated inputs so that team members understand the mechanics and the effect of future events on the final purchase price. Once the deal team has agreed on the mechanics, we recommend that buyers and sellers walk through an example to make sure that there is agreement on the mechanics before the deal is signed. It is often helpful to include an exhibit to the purchase agreement that sets forth an example purchase price adjustment to memorialize the parties’ agreement.
Similarly, it is important for the deal team to understand risk allocation provisions. This begins with clear identification of the assets and liabilities being acquired and assumed, and the representations and warranties being made. As with purchase price mechanics, we recommend that the deal team walk through the effect of problems with the target business discovered after closing, such as undisclosed litigation, obsolete inventory or breaches under material contracts. This involves analysis of the representations and warranties to determine if the problem actually constitutes a breach and whether the indemnification or other recourse provisions give the buyer any right to recovery, taking into consideration any thresholds, deductibles, caps or other limitations on claims. Analyzing how these problems are handled under the purchase agreement often helps the deal team develop a better sense of the critical points for negotiation and those on which it can be flexible.
As noted above, the deal team’s job doesn’t end with the signing of the purchase agreement. Setting the right tone early in the acquisition process will help ensure the team’s success through the closing dinner and beyond.
Further details are necessary for a complete understanding of the subjects covered in this article. For this reason, the specific advice of legal counsel is recommended before acting on any matter discussed within.
© 2006 Faegre & Benson LLP. All Rights Reserved.

About Jeffrey A. Beuche: This article, written by Jeffrey Beuche, a corporate attorney with Faegre & Benson LLP in Denver, originally appeared in the Denver Business Journal. Mr. Beuche can be reached at jbeuche@faegre.com.

Seasoned Investment Banker John Runningen Joins FOCUS as Partner
FOCUS Enterprises, Inc., a national middle market investment banking firm providing merger, acquisition, and corporate finance services, announced that John Runningen has joined the firm as a Partner. He will be based in the firm’s Atlanta Southeastern Regional headquarters office, which is located in the Atlanta Financial Center.
“We are delighted with John’s decision to join our firm as he brings a wealth of experience in the healthcare sector to FOCUS. John’s operations experience and his deep transactional experience will be ideal for FOCUS middle market clients” said Marshall Graham, Chairman of FOCUS.

About John Runningen

Mr. Runningen, who brings twenty-five years of entrepreneurial and investment banking experience to FOCUS, has conducted 80 separate investment banking and M&A transactions for 44 companies with an aggregate value of $18.6 billion. Prior to joining FOCUS, Mr. Runningen was Managing Director of Runningen Associates, LLC, as well as Senior Vice President, Investor Relations at WebMD (NASDAQ: HLTH). He also served as a General Partner at Cordova Ventures, a $250 million venture fund.

FOCUS Web Watch: New HOME PAGE

Stunning new graphics underscore the presentation of FOCUS benefits at top left and center of the revised FOCUS Home Page. Below the new graphics, on the left is the latest FOCUS News, and, in the middle column under Recent Transactions is a statement by a FOCUS client describing the experience of working with the firm.

About FOCUS Enterprises, Inc.

Headquartered in Washington DC, with offices in Atlanta, Chicago, and San Francisco, FOCUS provides a range of investment banking services tailored to the needs of middle market companies. FOCUS specializes in serving businesses with revenue or transaction sizes between $5 million and $300 million, serving entrepreneurs, corporate owners, public companies, private companies or operating units, and various types of investors.

For 24 years, FOCUS has successfully integrated corporate development consulting and transactional expertise with its extensive research capability. The firm has long standing experience in completing mergers, acquisitions, divestitures, capital formation assignments, corporate development consulting projects, and financial advisory engagements.

Over twenty FOCUS Partners and Principals provide over two centuries of C-level operating experience in a variety of industries.

Please contact us at: info@focusbankers.com