Mark Hauser Details How Private Equity Deals Are Done
To help CEOs and aspiring entrepreneurs understand the basics of private equity transactions, CFO Mark Hauser offered a rundown on the steps he takes as part of a business deal.
Hauser is a partner at BMO Capital Markets, a division of Bank of Montreal, which ValueAct Capital Partners acquired in May 2012.
ValueAct specializes in private equity investments. An activist investor buys into companies it believes are undervalued and tries to squeeze out the value – via buyouts or changing the fundamentals of operations – for its investors. The Washington-based firm manages $16 billion in assets.
Mark Hauser sat down with us to explain his steps once a company says, “Let’s do a deal.” You can read the interview below:
What does an M&A deal look like in this day and age? What is your typical process?
The process of doing an M&A deal right now is that you are probably approached by somebody who knows somebody who knows somebody else. And so, we’ll receive a call from someone who says, “You know, we think this company is undervalued and ValueAct is interested in looking at it.” And that’s all the detail that you get.
That person may or may not have bought a position in the company, but they’re trying to push this deal forward. So we would go and meet with the management team of that business and then try to convince them how to get a deal done. Now, sometimes we’re successful, and sometimes we’re not.
What’s the next step in your process?
You’d go ahead and try to form a transaction. At that point, we usually call in the financial advisor, who will put together a deal memo. And then we’ll send that out to ValueAct and other potential acquirers or private equity firms to see what they say. We do an initial round of meetings where they return with feedback on whether it makes sense.