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M&A (Merger and acquisitions) simply means the buying and selling of companies.
Merger - is a combination of two or more entities where each merging entity has a equal stake in the new enterprise and each merging entity has a very clearly defined role in the new entity.
Acquisition - is when one company buys another company, a division of another company, or a product line or certain assets. Starting up a new product line may be less expensive than buying an existing one, but the market may take a whale to adapt to the new product, if it does at all.
Buyers
Strategic buyer (synergy to its business)
Financial buyers (private equity funds)
Other companies backed by private equity funds
Individuals
Seller
The spinoff
The change of control
The recap
The growth capital
Consideration
Consideration is what seller receives from buyers as a result of selling the business. In its most obvious form, the consideration is cash, but cash is not the only way to pay for a business. Buyers may issue stock to seller in exchange for the business. Seller may accept a note from buyer. Or perhaps the price of the business is contingent, and buyer pays seller an earn-out based on the performance of the business after the transactions completion.
EBITDA
EBITDA (earning before interest, tax, depreciation, and amortisation)
It is the cash flow of a company without accounting for interest payments or interest income, tax, and certain non cash expenses. In other words, it measures the cash generated from doing what the company is supposed to do, sell its goods or services.
It is ofter the basis a company uses to determine its valuation.
Steps to getting a deal done
Compile a target list
Make contract with the targets
Sending a "blind teaser" if you're selling or ask for a executive summary if you're buying.
Sign a confidentially agreement
Send an offering document if you're selling, or review the offering document if you're buying.
Ask for a indication of interest if you're selling or submit one if you're buying.
Conduct management meetings.
Ask for a letter of intent (LOI) if you're selling or submit one if you're buying.
Participate in due diligence.
Craft a purchase agreement.
Attend closing.
Deal with post-closing adjustments and integration.
Costs associated with M&A
M&A deal-makers / advisory - Any Buyer or Seller should retain a capital M&A advisor (investment banker), a lawyer, and an accountant.
Legal fees
Accounting fees
Investment banking fees