In a traditional M&A process, management's interests are squeezed between the sellers' and the buyers' interests.

 

Managers must combine their full time job of running the business with the preparations of a transaction (preparing the data room, updating business plans, continuing financial reporting, management presentations etc.).

 

As a consequence, managers spend insufficient time on the proper negotiation of their own incentive package.

 

In addition, managers suffer from a lack of specialised knowledge and experience in the negotiation with professional investment funds and their specialised advisors.

 

Financial models, tax consequences and contractual mechanisms to protect management are complex. Studying them is time consuming.

 

At closing and in the aftermath of closing, management is compelled to signing documents potentially engaging their personal liability without having received independent advise thereon.

 

The lawyers of the buyer or the seller may offer to "take care of management to", but (i) grant no priority to that part of the transaction, (ii) offer no reliance to management as to their advice, and (iii) have an incentive to do the deal, independently of management's interests.

 

Therefore, independent, specialised advisors:

• defend managers' interests ;

• redress the imbalance in knowledge and experience ;

• align managers' interests with the investment fund's interests;

• review all documents required to be signed by management in the context of a transaction. Such review focuses on managers' potential personal liability, whereas review by the investor's lawyers is often limited to the validity of the documents in Newco's interest.