DealLawyers.com Blog

Investor relations firm Westwicke Partners recently blogged advice for buyers on how to communicate with Wall Street about an acquisition. Here’s an excerpt addressing some of the key points to address in communications with the 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 Business & 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 blog notes that announcing a new deal often provides an opportunity to reset Wall Street’s expectations for the business, so buyers should pay careful attention to the guidance provided, as it will be used as a benchmark to assess the buyer’s capabilities when it comes to both M&A and making good use of capital.

– John Jenkins