Prior to any transaction, the financial advisor may evaluate the different options of its client on a level where it needs to be considered whether the client should even engage in a transaction in general, or it should rather seek other strategic measures. These other measures could be, depending on the client’s situation, a greenfield approach to expanding the existing business, an IPO or a recapitalization, just to name a few. However, financial advisors, due to their extensive market knowledge, may present their clients favorable investment opportunities (“targets”) or suggest to management to consider a potential sale of their company, even if the client was not considering such a transaction as one of its strategic options. At this point it is worth saying that there is a potential conflict of interest arising from the fact that financial …show more content…
If the client wants to acquire a company, then the advisor will begin to identify possible firms and create a longlist of targets. This longlist will then be discussed with the client in order to narrow down the list of potential target firms, resulting in a shortlist of targets which then will be contacted by the financial advisor. This process is similar for clients who want to sell their corporation.
Contacting Potential Counterparties
Once the shortlist is defined by the financial advisor, the next step involves the contacting of the potential counterparties. For the initial contact in a sell-side deal, usually a teaser is prepared by the advisor (Rosenbaum & Pearl, 2009, p. 259). This small document is usually three to five pages long and is distributed to potential acquirers. In this document, the firm that wants to be sold is presented in a brief, anonymous way. If the potential acquirer signals their interest in the firm, a bigger