PRIVATE EQUITY DEAL PROCESS

What is a teaser?

A short, anonymous document used to generate buyer interest without revealing the seller’s identity.

Why is the seller’s identity excluded from a teaser?

To avoid market disruption and prevent competitors, employees, or customers from learning a sale is underway.

 What information is typically included in a teaser?

Business overview, products, revenue/profit mix, investment highlights, and summary financials.

What decision is the buyer making during teaser review?

Whether the opportunity merits further diligence and legal exposure.

Why are teasers reviewed in high volume?

Because most opportunities fail initial strategic, size, or return screens.This leads to a high volume of rejected deals before detailed analysis.

What is an NDA (Confidentiality Agreement)?

A legal agreement that governs access to and use of confidential seller information.

Why must an NDA be signed before receiving the CIM?

Because the CIM contains sensitive operational and financial information.

What is a standstill provision?

A restriction preventing buyers from acquiring shares of a public company

Why do standstill provisions apply only to public companies?

Because public shares can be accumulated to gain influence or force a deal.

What are key provisions found in an NDA?

Term, definition of confidential information, permitted representatives, non-solicitation, return/destruction of information, remedies.

 What is a CIM (Confidential Information Memorandum)?

A detailed document providing an in-depth overview of the business for first-pass analysis.

Typical length of a CIM?

Approximately 20–150 pages.

Why does the CIM rely heavily on management projections?

Because valuation and leverage capacity depend on forward-looking performance.

What is the buyer primarily evaluating when reviewing a CIM?

Business quality, growth drivers, risks, and credibility of projections.

What is a mini-model?

A simplified, single-tab Excel model used to assess initial returns.

 Why is a mini-model used instead of a full LBO initially?

Because speed and directional accuracy matter more than precision early on.

What does a mini-model typically include?

Sources & uses, summary P&L, simplified balance sheet, free cash flow, simplified debt, return metrics.

What is the purpose of management meetings in the first round?

To ask deeper questions and assess management quality.

What is evaluated beyond the formal presentation?

Management credibility, preparedness, and consistency with projections.

What are initial financing source indications?

Preliminary feedback from lenders on leverage levels and terms.This feedback helps gauge market appetite and guide deal structuring.

What conclusion is drawn if a deal fails the mini-model?

That returns cannot meet thresholds under reasonable assumptions.

 Why are lenders contacted before submitting an IOI?

To confirm that the proposed capital structure is financeable.

What information is included in an indicative term sheet?

Debt tranches, leverage, pricing, maturities, amortization, covenants, fees.

 What are first-pass investment review materials?

Internal memos or decks summarizing initial diligence and returns.

 Why is internal approval required before submitting an IOI?

Because advancing consumes firm resources and reputational capital.

What remains preliminary at this stage of the process?

Investment thesis and valuation assumptions.Potential deal structure and target identification.

What is an IOI?

A non-binding first-round bid expressing interest and credibility.

Why is the IOI non-binding?

Because diligence and final documentation are incomplete.

Why is price often presented as a range in an IOI?

Because valuation depends on diligence outcomes.It allows flexibility based on the final assessment of the target's value.

What does the IOI allow the seller to do?

Select a smaller group of credible bidders to advance.

What changes when a buyer enters the diligence deep dive?

The buyer performs more detailed analysis and assessment of the target's financials, operations, and potential risks, which can lead to adjustments in the valuation or deal structure.

What is the role of accounting advisors during diligence?

They provide financial analysis and ensure accuracy of financial information, identify potential financial risks, and help assess the target's overall financial health.

What is the purpose of a Quality of Earnings report?

To assess the target's historical earnings and provide insights into its financial performance.

What is a data room?

A secure online repository for documents and information that is critical for due diligence in the private equity deal process, allowing buyers to review important materials.

 Why is data room access permissioned?

To control the flow of sensitive information and protect confidential data during due diligence.

 What distinguishes on-site diligence from earlier meetings?

On-site diligence allows for an in-depth examination of the target's operations, culture, and key personnel, providing insights that earlier meetings may not reveal.

 What is a Letter of Intent (LOI)?

A preliminary agreement outlining the terms and conditions of a potential investment or acquisition, often serving as a foundation for further negotiations.

Why must financing be committed before submitting an LOI?

Financing must be committed to demonstrate that the buyer has the financial capacity to proceed with the transaction and to ensure that the offer is credible and serious.

What is a working capital target?

A working capital target is the desired amount of working capital that a buyer establishes during a transaction to ensure the target company can operate efficiently post-acquisition.

What is the purpose of the funds flow document?

To outline the movement of funds during a transaction, detailing the sources and uses of capital throughout the investment process.