bd and its process-by nick 2013.04.13

BD and its Process

上海普之康版权所有 Copyright - China Primary Care Co. Ltd

What’s BD BD stands for Business Development

“I do biz dev.” BUT WHAT EXACTLY IS IT?

“BD is sales” some will say, concisely.

“BD is partnerships” others will say, vaguely.

“BD is hustling” the startup folks will say, evasively.

“Business development is the creation of long-term value for an organization from

customers, markets, and relationships” (the Grand Unified Theory of business

development)

上海普之康版权所有 Copyright - China Primary Care Co. Ltd 2

Generally, BD contains 2 kinds: “Organic” and “Inorganic”

Organic: to amplify sales, MKT, services

Inorganic: Mergers and Acquisitions

Single

Sales/MKT

Group

Sales/MKT

Tech. Coop.

Mfg. Coop.

Brand. Coop.

Equity

Invest.(strategic)

minority 100% 50% control

Acquisition

Organic Inorganic

BD Process


Legal/

Contracts

Acquisition/

Integration

Deal timeline

Target Identification &Approach

Deal Structure

Negotiation Strategy

Deal Diligence

Valuation

Deal Structure

Target

Identification

& Approach

Negotiation

Strategy Process


Company Analysis

Core

Competencies

Corporate

Vision

New Competences

needed for vision

What your

company brings to

the table

Environmental Analysis

Industry Analysis

Related Merger

Environment

Stock Market Reaction

External

Assessment

Your Company Fit/ Synergy

Cost Savings Revenue

Enhancement

Strategic Fit and Option

Value

your Company’s

Position/Synergy

Potential

Deal Pipeline

Entry Option Evaluation

Target Company

Identification

Clear Vision for deal

process & integration

Acquisition

Target(s)

Negotiation

Strategy

Deal Diligence

Valuation

Target

Identification

& Approach

Deal

Structure

Target Identification & Approach


• Define criteria to rank attractive segments/business

• Select best entry option (build, buy, JV, …)

• Research all existing/new players in the industry

• Condense your list to the most attractive targets

• Preliminary DD(financial/market model), select best

• Make contact, NDA and LOI(value assumption)

• Determine how the acquisition process occurs

• Also remember to develop alternative candidates

Target

Identification

& Approach

Deal

Structure

Target

Identification

& Approach

Deal

Structure

Negotiation

Strategy

Deal Diligence

Valuation

Target

Identification

& Approach

Deal

Structure

Due Diligence


Preparation Execution Closure

Pre-

due diligence

• Resources & logistics

• Form & prep team

• Learn/index data room

• Prepare data requests

• Define ownership

• Communication plan

• Confidentiality

On-site

due diligence

Post

due diligence

• Management presentation

• Relationship building

• Complete assessment

• Site visits/diligence

• Validate/revise

valuation assumptions

• Due diligence report

• Proforma fine tuning

• Contractual points

• Integration plan

Negotiation

Strategy

Deal Diligence

Valuation

Target

Identification

& Approach

Deal

Structure

Valuation


Comparables Valuation methods

• Evaluate target against other companies that operate in same or similar industries

• Key elements: Public company financials(Sales, EBIT, EBITDA), market valuations and change of control premiums

Discounted Cash Flow Valuation methods

• To capture discounted value of after tax cash flows generated by a business to understand the economics of a transaction

• Key elements: After tax cash flows from operations, weighted average cost of capital, terminal value and synergies/restructuring costs

Financial Statement Impact Valuation methods

• Evaluate impact of a transaction on your own company’s earnings/EPS/EBIT/operating Margin rate/goodwill

• Key elements: Your own earnings after new goodwill and interest cost, pre and post acquisition financial metrics

Negotiation

Strategy

Deal Diligence

Valuation

Target

Identification

& Approach

Deal

Structure

When possible use all valuation methodologies … analyze value

from buyer and seller perspectives

Valuation objectives ... • Determine the appropriate range of acquisition values • Determine feasibility of the proposed transaction • Prepare for negotiations

Deal Structure


Negotiation

Strategy

Deal Diligence

Valuation

Target

Identification

& Approach

Deal

Structure

Asset Deal Deal Structure

• Forming new company with asset contribution

• Acquiring assets

• Assets swap

Equity Deal Deal Structure

• Acquiring equity of existing DE/SOE/FIE(including via capital expansion)

• Equity swap

• Merger

Combination of Equity&Asset Deal Deal Structure

• Mix of the two ways

Negotiation


• Don’t Talk About Your Synergies

• Keep Open Some Issues You Can Lose

• Use Written Open Issue Tables to Clarify Disagreement

• Never Hesitate To Call for a Team Break

• Think Ahead to the Other Side’s Reaction to Your

Comments and Positions…Don’t Fall Into Traps

• Be Ready to “Walk Away” On Critical Issues

• Don’t Be Compelled to Be Logical All the Time

• Stay Rational and Keep Your Emotions In Check

Negotiation

Strategy

Deal Diligence

Valuation

Target

Identification

& Approach

Deal

Structure

Legal/Contracts


Review Public

Data

Obtain Offering

Memo / Pitch

Book

Assess Strategic

“Fit”

Initial Contact

Confidentiality

Agreement

High Level

Information/

Discussions

Letter of Intent

(maybe)

Review of Confidential Information and Access to Target

Confirm Assumptions and Identify Red Flags

Timing Varies Greatly

Due Diligence Continues in Parallel

Sign and Announce

Begin Integration Planning

Obtain 3rd Party and Regulatory Consents

Close

Begin Integration and Compliance Training

First Opportunity to “Audit” Acquired Business

Better contracts will help to make deal clear, to protect more for you

and to avoid risks somehow

Evaluation Negotiations Post- Closing Preparation

Pre- Closing

Due

Diligence

Purchasing contracts

Acquisition Integration


Origination Signing Closing Normal operations

Where the rubber meets the road

“Making the deal work” “Doing the deal”

Due diligence

bd and its process-by nick 2013.04.13

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