Presenting Your M&A Deal To Wall Street
An acquisition carries the promise of growth and change, and a fair amount of risk, for any company. As a buyer, you may be seeking to broaden your service offerings or geographic footprint, add a new technology, transform the company by expanding into a new healthcare segment, or become a bigger player in a consolidating market.
The prospect of change can be exciting and energizing. At the same time, the process — from shopping to deal integration — is complex and requires skillful planning and management.
Communicating the details with Wall Street is a vital step for a publicly traded company, one that can shape the market’s attitude towards a deal and ultimately the value of your stock. Depending on the transaction’s size, complexity and relative significance, disclosure can vary — from a simple press release to a public conference call with accompanying presentation.
To frame your communication, it’s helpful to understand how Wall Street will analyze your announcement. Analysts and investors will try to wrap their heads around several key areas, all aimed at answering one question: Does this acquisition create real value for shareholders?
Below is a list of points you should consider disclosing when communicating an M&A to Wall Street:
- Deal Terms. These are the transaction’s high-level financial points. How much did you pay, what was the structure of the deal (cash vs. stock vs. cash and stock), how did you finance the deal, etc. This allows the Street to assess the deal’s impact on your current financial profile and frame the rest of its analysis.
- Strategic Rationale. This allows you to answer the question on everyone’s mind: Why did you make this acquisition? Does it grow your top line, does it accelerate your path to profitability, does it expand your addressable market, does it fill a hole in your product or service offering, are there synergies?
- Overview of the Acquired Asset or Company and the Market Opportunity. Think of this as your opportunity to introduce the company and provide a framework for how to model the new business. What does the company do, how does or will it generate revenues, what is its growth rate, what is its total addressable market, and, if applicable, what is its financial profile?
- Introduce New Co. Building on the other information you’ve just provided, you now need to show what the post-acquisition company looks like, clearly outlining any aspect of your story that has changed. What does the revenue growth rate look like now, how will the acquisition affect your gross margins, and how does this impact your bottom line? Analysts and investors will want to know your outlook post deal. The announcement of an acquisition provides you with an opportunity to reset Wall Street’s expectations for your business, so careful attention should be paid to the guidance provided, as the Street will use it as a benchmark to effectively grade your ability as acquirers and, ultimately, stewards of capital.
You’ve spent months or even years to get to this point — identifying targets, doing due diligence, securing financing, negotiating deal terms, and preparing for integration. Take the time to ensure your hard work shows as you present and discuss your deal with the Street. Be prepared to answer both high-level and granular questions while emphasizing the acquisition’s broad purpose and benefits.
Your ability to effectively and confidently communicate your acquisition can influence Wall Street’s reaction to the news and in turn how they assign value to the deal.
Have questions about presenting your acquisition to the investment community? Get in touch with Westwicke. We have more than 300 years of Wall Street experience combined and can help guide your company in communicating effectively with investors and analysts.
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