M&A Process Cheat Sheet
Sell-Side M&A Process (Auction)
| Phase | Timeline | Key Activities | Key Documents |
|---|---|---|---|
| 1. Preparation | Weeks 1–4 | Engage advisors, prepare marketing materials, identify buyers | Engagement letter, CIM, Teaser |
| 2. First Round | Weeks 4–8 | Contact buyers, distribute teasers, sign NDAs, send CIM | Teaser, NDA, CIM, Process Letter |
| 3. First Round Bids | Week 8–10 | Receive IOIs, evaluate non-binding offers, create short list | Indication of Interest (IOI) |
| 4. Second Round | Weeks 10–16 | Management presentations, data room access, due diligence | Management Presentation, VDR |
| 5. Final Bids | Week 16–18 | Receive binding LOIs with markup of purchase agreement | Letter of Intent (LOI) |
| 6. Negotiation | Weeks 18–22 | Negotiate price, terms, reps & warranties, indemnification | Purchase Agreement (SPA/APA) |
| 7. Signing & Closing | Weeks 22–26+ | Sign definitive agreement, regulatory approvals, close | Definitive Agreement, HSR Filing |
Buy-Side M&A Process
| Phase | Key Activities | Analyst Work |
|---|---|---|
| Target Identification | Screen for targets based on strategic criteria | Build target lists, comp analysis, preliminary valuation |
| Preliminary Valuation | Estimate value range using public data | Comps, precedent transactions, preliminary DCF |
| Approach & NDA | Contact target, sign confidentiality agreement | Draft outreach materials |
| Due Diligence | Deep-dive into financials, operations, legal, tax | Build detailed operating model, identify risks |
| Offer & Negotiation | Submit LOI, negotiate terms | Accretion/dilution analysis, synergy modeling |
| Financing | Arrange debt and equity financing | Deal structure analysis, sources & uses |
| Closing | Regulatory approval, shareholder vote, close | Final presentation materials, fairness opinion support |
Key M&A Documents Explained
| Document | Purpose | Who Prepares It |
|---|---|---|
| Teaser | 1–2 page anonymous summary to gauge buyer interest | Sell-side advisor |
| NDA / CA | Protects confidential information | Sell-side counsel |
| CIM (Confidential Info Memo) | 50–100 page detailed company overview for serious buyers | Sell-side advisor |
| IOI (Indication of Interest) | Non-binding preliminary offer with price range | Buyer |
| LOI (Letter of Intent) | More detailed offer with key terms, triggers exclusivity | Buyer |
| Purchase Agreement (SPA) | Definitive legal document governing the transaction | Buyer’s counsel (typically) |
| Fairness Opinion | Board-level opinion that price is fair from a financial POV | Independent advisor |
Valuation Methods Used in M&A
Every M&A deal uses multiple valuation approaches to triangulate a fair price range. The three core methodologies are comparable company analysis (trading multiples), precedent transactions (deal multiples), and DCF analysis (intrinsic value). The “football field” chart displays the range from each method side by side, which helps negotiate price and support fairness opinions.
Key Takeaways
- A typical sell-side auction takes 4–6 months from preparation to closing.
- The process moves from broad (many buyers, teaser) to narrow (short list, binding offers).
- Due diligence is the most work-intensive phase — expect long hours in the data room.
- IOI is non-binding; LOI is semi-binding and typically triggers exclusivity.
- The definitive purchase agreement (SPA) contains reps, warranties, and indemnification that allocate risk between buyer and seller.
FAQ
What is the difference between an IOI and an LOI?
An IOI (Indication of Interest) is a non-binding preliminary offer that includes a price range and general terms. An LOI (Letter of Intent) is more detailed, includes specific price and conditions, and usually triggers an exclusivity period for the buyer.
How long does a typical M&A deal take?
A sell-side auction typically takes 4–6 months. Negotiated deals can be faster (2–3 months) or slower depending on complexity. Regulatory approvals (HSR, CFIUS, antitrust) can add 1–6 months after signing.
What is a CIM in M&A?
A Confidential Information Memorandum is a detailed marketing document (50–100+ pages) that presents the target company to potential buyers. It covers business overview, market opportunity, financials, management team, and growth prospects.
What is an earnout in M&A?
An earnout is contingent consideration where part of the purchase price is paid later, based on the target meeting certain performance milestones. It bridges valuation gaps between buyer and seller expectations. See deal structures for more details.
Who pays the investment bank fees in M&A?
Each side pays its own advisors. Sell-side advisory fees are typically 1–2% of deal value (higher for smaller deals). Buy-side fees are often lower and may include a retainer plus success fee. Both sides also pay their own legal and accounting fees.