COVID-19 heaps further pressure on management teams. There is no such thing as a “normal” day. Every day brings new crises to be managed – remotely, as lockdowns mean many companies are having to continue working from home.
COVID-19 heaps further pressure on management teams. There is no such thing as a “normal” day. Every day brings new crises to be managed – remotely, as lockdowns mean many companies are having to continue working from home. What keeps the show on the road is the company’s culture and organisational structure. Without each of those in place, the company risks the future of the business and the livelihood of hundreds or thousands of employees, their families, and suppliers.
The Deal Team is a professional transaction manager for strategic corporate transactions such as M&A, equity and debt capital markets. So, you could say we’re experts at deal management, including remote execution. We want every company to have the tools to achieve the best result possible for their transaction, with the lowest internal costs. So we’re sharing four of the most important parts of our Practice Manual for managing transaction execution – Team, Prep, Market and Close.
1. TEAM: Internal Team Management and Coordination
First and foremost, the senior management team has to remain focused on running the business. It is the reason why the transaction is being considered, and the reason bidders or investors might invest in the company. A major transaction will require a large investment of management time and sheer exhaustion is not out of the ordinary, particularly in founder-managed companies. Covid merely increases this pressure by forcing remote working and making the need even greater for effective transaction management.
And if the internal team has not seen these transactions before, then as an experienced CEO said at the London Stock Exchange IPO Forum, “Those that haven’t experienced this before don’t know what to be afraid of, and why…bring on extra capacity to handle the curveballs”.
When building your internal team, consider the following:
- Identify the Project Manager who is responsible for maintaining oversight of the whole project, and introduce them in that role to internal and external stakeholders.
- Set out the responsibilities and reporting lines for each transaction role/subject matter expert, in an easy to read one-page table.
- Consider holding a virtual morning coffee for the day-to-day team, since coffee-machine chats are no longer possible. Team members may be pulled out of their comfort zone by the transaction, it requires work to bring them back in so they can be kept at ease, productive, and still lean.
- The senior project leaders may need to spend most, if not all, their time running the transaction. For internal reassignments, make sure their day to day role is being covered while also being clear it is for a temporary internal project and will return.
- Be prepared to be agile in case of short-notice lockdowns, self-isolation, and team incapacity – unfortunately. Particularly with the key knowledge gatekeepers in the company, make sure they are operating with backup.
Remote working means that regular and clear communication is even more essential. For effective operations, have in place the following:
- Use the new familiarity with remote working platforms and knowledge sharing to keep the internal teams connected. To avoid miscommunication, agree early on the common internal communication platform, and also the common platform for the advisors
- If the transaction is particularly sensitive, use enterprise-grade platforms with higher data security instead of e.g. conference calls.
- Hold a (virtual) all-hands internal team briefing on the deal structure, calendar, and team responsibilities, which should be led by the Project Manager.
- Empower the Project Manager to guide and oversee the delivery of other team members, and grant ad-hoc access to the relevant senior management (CEO, CFO, Head of M&A/Legal etc.).
- Hold a weekly internal project call with core internal team members and senior decision-makers (including as appropriate shareholders etc.), reviewing progress in the previous week, key deliverables in the coming weeks, and making any formal requests and to-dos.
- PAs for senior management will need to understand the transaction priority. The Project Manager will work with them to give clear heads up of the transaction demands on the diaries of the senior leadership team, and minimise emergency disruptions which can have a material cumulative effect on the business performance.
2. PREP: Due Diligence: Dataroom, Disclosure and Drafting
Dataroom: We’ve discussed best practices for dataroom and due diligence procedures in our recent article Managing the details: best practices for due diligence and data room management, which covers the dataroom internal team and Subject Matter Experts, document handling procedures and naming protocols, governance and approval processes, and ongoing update obligations. The good news is that many companies will already have much of their corporate and legal documents, business and financial reporting infrastructure online. So, the processes of refining the existing virtual dataroom will be second nature.
Disclosure Documents: Preparing an Information Memorandum for M&A, or a Prospectus for a capital markets transaction, doesn’t happen frequently. It may even be the first time the company has been described in such detail. Each statement will need to be backed up with reliable data and sources in the dataroom, and be consistent with the overall company story and business plan. If it’s a securities offering, like a bond offering or an IPO, then the Prospectus will need to be fully verified, by lawyers and accountants ticking off every material statement and number and tracing back to source materials/reporting. This disclosure needs to be consistent with the company’s existing disclosure so do be aware of the impact this may have on corporate communications, website etc.
Drafting: Agree an internal drafting process with your key team members, particularly ownership of consolidation and sign-offs, and hold an internal briefing on the expected style, content and length of the document, The aim is to provide a document to the advisors that is 90% right in the first draft. This will avoid wasting scarce internal time and on multiple drafting sessions to repair the damage.
3. MARKET: Site Visits, Virtual Roadshows, and Q&A Processes
Site Visits: Put yourself in the bidders’ and due diligence advisors’ shoes. Could a virtual site visit be perceived as an excuse to hide something? Decide early on whether physical site visits are desirable or necessary. If so, consider the requirements for social distancing and safety procedures, for visitors as well as staff. In addition, think about the usual needs, such as leaving sufficient time between visiting bidders, travel logistics, provision of refreshments and meals. Brief the employees leading the site visits, on the can/can’t-do’s. Ensure they have approved scripts and topics for discussion, and how to answer questions that go beyond their remit.
Virtual roadshows: Investors and advisors have now experienced several months of virtual roadshows. In general, these have been working well and it’s expected that some portion of future roadshows could remain virtual. The advantage for management teams is that by removing the need to spend time travelling, a virtual roadshow timetable gives management teams more time to continue running the business. Your advisors many also use this increased flexibility to increase the number of investor meetings and even a shorter marketing period, as well as provide quicker responses to followup questions. However, you will want to ask your advisors about the merits of face-to-face versus virtual meetings for the most important potential investors.
Q&A in M&A: The Q&A process allows bidders and their advisors to probe the business. Have a clear governance process for generating responses and ensuring consistency of replies across bidders. Note that speedy responses – even if “that will take us a few days to produce” – can have a positive impact on the competitive tension of an M&A auction process. Consider agreeing an internal turnaround deadline (e.g. 48 hours) and communicate that to bidders.
4. CLOSE: Approvals and Signing
Approvals: Set out and agree ahead of time the necessary corporate governance steps for announcement and closing, working with the Company Secretarial team. Make sure each of the necessary Board approvals is clearly identified, and put placeholders well ahead of time for these – especially if there are external board members, or where board meetings must take place in the country of incorporation. If shareholder approvals are required, understand the necessary general meeting notifications and quorums – and any limitations on holding virtual general meetings. In private transactions, pay particular attention where shareholder decision-making could be slower, such as needing their own internal approvals or where there has been a debt-for-equity swap.
Some jurisdictions require filing of notarial deeds, registrations of share capital, or other public approvals before transactions can be closed. Many of these public offices have been closed or much slower than normal during lockdowns, meaning a potential delay in deal processes. Understand early on what these bottlenecks could be, then plan how to work around or pre-prepare.
Signing: Signing procedures may vary by practice, regulation, and company procedures. In the majority of situations, electronic signatures may be sufficient, however do review whether a) this needs to be a scanned original or can be an entirely electronic version (e.g. signing a touch screen) b) multiple original copies are required for deal bibles or c) physical sight of wet ink signatures is needed.
The Deal Team supports companies small, mid and large to improve the quality of their execution and their transaction outcomes. We’re delighted if this brief discussion of remote deal management procedures has helped your transaction. It’s prudent to make sure you’ve got the capacity to efficiently deliver what your advisory team needs, so they can do their job. And if you decide that professional transaction support could help your deal – as always, we’re here to help.
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