Business owners looking to take their company to market have options. When good companies go to market prepared, there’s a chance there are multiple bidders.
“The most successful sale processes are ones where you have a lot of demand for the company,” says Suzanne Yoon, founder and managing partner of Kinzie Capital Management. “So, how do we create that demand and then also make sure that we're going to the best potential buyers for our companies? We would be looking at strategic fit, ability to close — the certainty of close is very important for us — and then also just making sure we understand the debt capital markets prior to going out for an auction process.”
In the world of M&A, Yoon says there are proprietary processes and auctions.
“There's really nothing in between,” she says.
An auction means a business is going out to multiple potential buyers.
“The more companies that are interested in your company, the better the results hopefully will be,” she says. “It just creates a demand scenario.”
The process starts typically with the hiring of an investment banker or other deal professional to help create that auction. There can be various auction scenarios. For example, companies that are going through chapter 11 go through auction processes. These are more public in nature because they go through the court system. A private auction is undertaken when an investment banker either goes out to select strategic investors, or starts a broader auction where they're going to thousands of private equity firms in addition to strategics.
“Most people do not like to participate in those processes, but the reality is today, with the markets as efficient as they are, there's really no such thing as a proprietary deal anymore,” Yoon says. “I know people really like the idea of that but I don't think they really exist.”
At the Chicago Smart Business Dealmakers Conference, Yoon, along with Michelle Moore, a partner at Reed Smith; Vipul Patel, senior vice president at Aon; and Daniel Woodland, vice president and president, Electronic Materials, at CMC Materials; discuss companies’ sell-side prep and M&A options, including auctions, strategic buyers and risk mitigation. Hit play on the video above to catch the full panel discussion.
