Largest M&A Transactions of the Year Still to Come
PE: When evaluating a prospective acquisition, what would you advise the buyer to look for in the new company? And what red flags should you keep an eye out for?
Phillips: I think you are always looking very hard at the financials—revenue, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) and … growth: How much has the business grown in the last three years? What are the growth prospects in the next three years? Those are the key areas I would emphasize. One of the things that you need to ensure is that the seller is properly allocating all of the expenses associated with running the business to the business, so that they are not showing an inflated EBITDA.
PE: How long does the entire acquisition process typically take, start to finish?
Phillips: Typically, when [we are representing] the seller, a sales process, start-to-finish, typically takes six months. We would prepare an offering memorandum describing the business, and we would then approach logical buyers on behalf of the client. We would then negotiate the transaction to the closing.
PE: So you expect a very active second half of 2006 in the M&A market?
Phillips: Definitely. We have completed eight transactions as of today [for 2006], but we have more in the pipeline than we’ve ever had in our history, I would say.