How an Acquisition Goes Down
An owner of a successful company decides he wants to sell it and make some cash. The company contacts several investment banks and lets them know. The banks scramble to put together pitches to try to win the company's business.
The pitch contains sections like an executive summary of everything the i-bank thinks it knows about the company, an industry overview, an estimated value based on how much similar companies were sold for, and a cash-flow analysis.
When an investment bank wins the bid, it puts together a fifty- to 100-page book of marketing materials to send out and a pitch to present to potential buyers. The bankers work closely with the company's management team to learn everything about the company and its finances. The bankers and management team then make the presentation to interested buyers.
Once a buyer is selected, it has exclusivity and a sixty-day window for due diligence, where it basically tries to find any way possible to pay less than the amount stated in the letter of intent. In an exhaustive process, everything about the company is placed in an online database and usually managed by the analysts.
Almost half of the time, the deal falls apart. If this happens, the I-bank doesn't get paid.
If the deal does go through, the I-bankers go out and get drunk.