m&a counsel and dealmaking: leveraging access to capital...

M&A Counsel and Dealmaking: Leveraging

Access to Capital and Market Conditions Managing Post-Closing Integration, Governance and Due Diligence Challenges

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THURSDAY, MAY 16, 2013

Presenting a live 90-minute webinar with interactive Q&A

Andrew J. Sherman, Partner, Jones Day, Washington, D.C.

Joan E. McKown, Partner, Jones Day, Washington, D.C.

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©COPYRIGHT 2013. ANDREW J. SHERMAN. ALL RIGHTS RESERVED 3120761

M&A Dealmaking and Leveraging Access to Capital

Andrew J. Sherman, Esq.

Jones Day

51 Louisiana Avenue, N.W.

Washington, D.C. 20001-2113

202-879-3686

[email protected]

Strafford Publications

Webcast May 16, 2013

1:00 p.m. to 2:30 p.m.

5

Joan E. McKown

Jones Day

51 Louisiana Avenue, N.W.

Washington, D.C. 20001-2113

202-879-3647

[email protected]

©COPYRIGHT 2013. ANDREW J. SHERMAN. ALL RIGHTS RESERVED

Andrew J. Sherman

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Mr. Sherman is a partner in the Washington, D.C. office of Jones Day with over 2,700 lawyers

worldwide.

He is the author of 26 books on business growth, capital formation and the leveraging of

intellectual property. His eighteenth (18th) book, Road Rules Be the Truck. Not the Squirrel.

(http://www.bethetruck.com) is an inspirational book which was published in the Fall of 2008.

His twenty-third (23rd) book, Harvesting Intangible Assets, Uncover Hidden Revenue in Your

Company’s Intellectual Property, (AMACOM) was published in October of 2011. His twenty-

fourth (24th) book, Raising Capital, 3rd edition was published in the Spring of 2012, his twenty-

fifth (25th) book, Essays on Governance published in late Spring of 2012. His twenty-sixth

(26th) book, co-authored with Elizabeth Vazquez, Buying For Impact: How Buying From

Women Will Change the World, was published in February of 2013. He has appeared as a

guest and a commentator on all of the major television networks as well as CNBC’s “Power

Lunch,” CNN’s “Day Watch,” CNNfn’s “For Entrepreneurs Only,” USA Network’s “First

Business,” and Bloomberg’s “Small Business Weekly.” He has appeared on numerous

regional and local television broadcasts as well as national and local radio interviews for

National Public Radio (NPR), Business News Network (BNN), Bloomberg Radio, AP Radio

Network, Voice of America, Talk America Radio Network and the USA Radio Network, as a

resource on capital formation, entrepreneurship and technology development.

He has served as a top-rated Adjunct Professor in the Masters of Business Administration

(MBA) programs at the University of Maryland for 23 years and at Georgetown University for

15 years where he teaches courses on business growth strategy.

He has served as General Counsel to the Young Entrepreneurs’ Organization (YEO) since

1987. In 2003, Fortune magazine named him one of the Top Ten Minds in Entrepreneurship

and in February of 2006, Inc. magazine named him one of the all-time champions and

supporters of entrepreneurship.


Seven (7) Key M&A Trends for 2013

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Seven (7) Global M&A Trends For 2013

• The Weight of Uncertainty

• Cash and Resource Stockpiles

• Eating the Elephant One Bite At A Time

• Depth and Breadth of Due Diligence

• Critical Importance of Post-Closing Synergy Capture

and Integration Plan

• Changing Ecosystem and Influence of Key Players

• Staying Close to Home

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The Weigh of Uncertainty

• Business leaders not as likely to make capital allocation decisions in the face of budget/tax/policy/ uncertainty and political/social divisiveness

• Multiple tax changes will affect the decision-making of potential sellers

• Uptick in FCPA regulatory investigations and paperwork red tape not helping

• But the aging of the population may force the issue

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Cash and Resource Stockpiles (When will the levee break?)

• S&P 500/$2.7 trillion (and hundreds of billions of U.S. dollars are “stuck” abroad due to the tax consequences of bring the money home)

• PE and VC Fund overhang

• Hedge funds with broken algorithims

• Sovereign funds

• Pension funds/insurance companies

• Non-cash resources (expertise, channels, manufacturing capacity, know-how)/HIA

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Eating the Elephant One Bite At A Time

• Mega-deals may be on hold

• Heavy focus on bolt-on’s, smaller deals, filling in missing puzzle pieces, emerging technology land-grabs, forward and backward channel integration, etc. as leaders and boards remain cautious and risk-adverse

• Could be the drizzle before the storm or could stay as just drizzle

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Depth and Breadth of Due Diligence

• ERM becomes the primary motivator in due diligence

• FCPA and multiple compliance risks drive the costs of due diligence higher

• The breadth/depth/scope/ length of due diligence getting deeper and longer

• Higher chances of deal derailment

• Drives higher transactional costs, putting further pressure on post-closing ROI objectives

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Critical Importance of Post-Closing Synergy Capture and Integration Plan • Global consulting and accounting firm studies each

year by Deloitte, PWC, etc. continue to find that 50 to

70% of M&A transactions fail to meet their pre-closing

business objectives within three (3) years after closing

• McKinsey reports that 61% of acquisition programs fail

because the strategy ultimately does not earn a

sufficient ROI on the funds invested and total

resources deployed

• Mark Sirower (Author of The Synergy Trap) estimates

that over 75% of M&A transactions fail to meet or

exceed the pre-closing articulated synergies or

projected cost-savings within 3-5 years following the

closing of the transaction

• Hewitt’s annual M&A Survey of 103 global companies

found that only 44% of the M&A deals closed met or

exceeded their stated transaction goals

• In an environment when board decision-making

and resource allocation is under the board

governance microscope, how can we do better in

2013 and beyond?

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The Changing EcoSystem

• Strategic buyers hungry for growth are pushing financial buyers (PE Firms) out of the way and are able to outbid given cash stockpiles

• Shareholder activist groups are weighing in on deals on both the buy and sell side and are holding boards accountable for “suspect” deals (Ex: HP/Autonomy)

• Fairness opinions, third-party valuations, board deadlock-breaking mechanisms, special transactional committees, multiple sets of advisors all likely to be more important “players” in this new ecosystem

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Staying Close to Home

• Boards and leaders may be more likely to approve a transaction which is “in their own backyard” or close to their core competencies

• Cross-border deals may be down in 2013 with political uncertainty and instability in so many regions

• Getting global deals done and properly integrated has prove more challenging in many cases than initially expected

• More challenging to raise “third party” acquisition capital when deals are 8,000 miles away

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The Changing Role of the Board in M&A

16


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The Evolving Role of the Board In M&A

• Best practices to meet your obligations, fiduciary duties and to the moral commitments of stewardship include:

Decision-making must be informed and on the basis of robust debate

Zero-tolerance for conflicts of interest

ERM plan firmly in place

No room or tolerance for fiefdoms, turfmanship, cliques, politics, nepotism, back-door or side-door deal-making, red tape, politics, “2nd class” board members, etc. (and the decentralization of Executive Committees and/or the domination of the “insider” board members, the appointment of an independent “lead” director, etc. are also providing the basis for more inclusive decision-making)

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The Evolving Role of the Board In M&A (Cont’d)

• Self-interest must be secondary to institutional best

interests (if prevalent at all)

• Forward-thinking IAM and intangible asset

harvesting strategy (AOL case)

• Proactive recognition of shareholder/stakeholder

activism and weigh-in on board composition, board

candidacy, board compensation, etc. (Dodd-Frank

whistle-blowing and say-on-pay roles, shareholder

objections to board members at Yahoo, Goldman

Sachs, RIMM, Bank of America, BP, JP Morgan,

Herbalife, etc. – trickle down and ripple effect)

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20

The Board and M&A

Key Functions/ Issues

Oversight Over Allocation of Time & Resources of the

Company/Leadership Team (Gatekeeper Role)

Review and Analysis of M&A Plan (Alignment with Strategic

Plan and Mission/Values,

Key Criteria, Screens &

Filters, etc.)

Roles and Responsibilities of

Key External Advisors

Experience of the Overall Board &

Individual Members with

M&A

Evaluate/Oversee Competencies of

Company’s Leadership Team to

Execute/Manage M&A and Post-

Closing

Set Overall Growth Strategy (including M&A, Buy vs. Build,

etc.)

Degree of Board Involvement Based on Size/Impact/Complexity of Proposed Transaction


What is the Role of the Board in M&A?

Macro Roles:

Embrace and meet fiduciary obligations

Oversight of management

Test and confirm economic premise of proposed transaction

Confirm value – proposition to the stockholders

Confirm that steps have been taken to mitigate risk and reduce the chances of conflict/litigation

Confirm that F/U/D’s of existing/affected teams are addressed (WIFM)

Confirm that a post-closing integration plan is in place

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What is the Role of the Board in M&A? (Cont’d)

Micro Roles:

Confirm compliance regarding timing and scope

of transaction disclosure (and short-swing on

insider trading)

Confirm all legal/financial/strategic due diligence

steps have been taken and best practices taken

Confirm all key third party (contractual and

regulatory) approvals have (or will be) secured

on a timely basis

Confirm allocation of risk is fair and reasonable

relative to reward/upside

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Issues and Challenges

• Company as buyer (financial vs. strategic vs. hybrid)

vs. seller (spin-off’s, divestitures, streamlining,

consolidation, etc.) vs. mergers vs. investments vs.

other transactions (JV/Master Franchising, etc.)

• Alignment between views/incentives/politics/domain/

focus on M&A between board and company’s

leaders (look out for conflicts/disconnects/conflicts

of interest)

• Related-party transactions, waivers and violations of

duties

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Key Issues and Challenges (Cont’d)

• Development of pre-deal metrics that will help

predict and produce post-closing success (e.g. on

what basis is success defined 1/3/5 years after

closing?)

• Is this transaction the highest and best use of

company resources to achieve the defined

objectives? vs. other alternatives? Have those

alternatives been adequately vetted?

• Test economic assumptions, goals and strategic

premises of each significant tran saction

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• Buy-side risks:

Inadequate due diligence, hostile vs. friendly

transactions (including analysis of the true cost of

poison pills or other anti-takeover provisions or

plan adopted by the target), overpayment,

incomplete understanding of target’s business

model or operations, flawed risk management

protections (both within the deal documents and

operational risks), cultural clashes, integration

challenges, etc.

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• Sell-side risks:

Best price/terms/timing of the sale of these

assets (Revlon vs. MacAndrews Forbes case),

strategic impact of the sale, analysis of types of

buyers (competitive vs. non-competitive, financial

vs. strategic vs. hybrids), cultural implications of

sale, tax consequences to selling shareholders,

third-party valuations and fairness opinions, key

regulatory or other third party approvals, etc.

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• Increased role, profile and assertiveness of

shareholders and activist groups who will “weigh-in”

on proposed transactions of all sides of the table

(Ex: Dynegy, Dollar Thrifty, Airgas, etc.)

• Financial Analysis:

Accretive vs. Dilutive, short-term vs. long-term

goals, cost-of-capital issues (relative to projected

IRR), durability and stablity of target, EBITDA,

etc.

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• Impact Analysis:

How will the proposed transaction impact current and potential customers, current and potential vendors, current and potential distributors/ dealers/channels, current and future employees, etc.?

• Regulatory Analysis:

Regulatory and third party approvals, domestic vs. overseas approvals, special licenses and permits transfers, antitrust implications, regulated industries, etc.

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Current Trends and Best Practices in Due Diligence

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What Is “Due Diligence”?

• Due diligence is both an art and a science

• Proper due diligence involves:

Knowing where to look

Knowing what to ask

Knowing what tools to use

Knowing who to ask

Knowing how to test premises/answers

Knowing who should ask

Knowing how to verify

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What Is “Due Diligence”? (Cont’d)

• The “Art” of Due Diligence:

Understanding how to extract key information from a person or situation

Understanding the objectives of the parties and the underlying transaction

Identifying key hurdles and risks

Identifying why information might be falsified or omitted

Targeting the proper sources for disclosure of information

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What Is “Due Diligence”? (Cont’d)

• The “Science” of Due Diligence:

Do your homework

Be prepared and well-organized

Be precise in your requests

Be persistent in your quest for the truth

Don’t accept the first answer as the final answer

Trust your gut – “if it’s too good to be true …”

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Our Due Diligence “Heros”

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Peter Falk

AJS TO

PICK PICTURE

AJS TO

PICK PICTURE

Curious George Sherlock Holmes

33


Due Diligence and Current Events

• Impact of 9/11/01 Attacks

• Impact of Dot.com failures and Enron

• The era of Sarbanes-Oxley

• Subprime Crisis

• The Madoff and Stanford scandals

• Overall global recession and financial system woes

Bottom Line: We are in an era where everything and

everyone must be questioned and

answers verified

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Dealing With Due Diligence Surprises

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Walk/Run Away

Purchase Agreement Amendments

and Protections (Hold backs, R+W’s,

Indemnifications, Escrows, etc.)

Purchase Price Adjustments

(or Terms) Ignore

Cost

Risk

35


Due Diligence Best Practices

• Work as a team, but have a clear quarterback/captain

• Designate a primary point of contact for each party to the transaction

• Conduct regular team meetings to compare notes and coordinate carefully

• The more you know, the better questions you can ask

• Be organized – set timetables and deadlines for deliverables

• Use industry experts early and often

• Use technological tools available to you (search engines, data rooms, etc.)

• Develop penalties/consequences/remedies for non-compliance

• Understand why a party may be trying to hide key facts or circumstances

• Question everything – BE INQUISITIVE!

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Conducting Effective Anti-Corruption Legal Due Diligence in Mergers & Acquisitions

(Joan E. McKown)

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Joan E. McKown • Joan McKown's practice focuses on investigations, enforcement actions, and other proceeding

with U.S. and foreign regulators. Joan also counsels financial institutions, boards,

corporations, and individuals on issues related to the U.S. Securities and Exchange

Commission, as well as corporate governance, compliance, and ethics matters.

• Joan recently represented corporations and corporate officers in SEC investigations

involving corporate disclosure, books and records, internal controls, insider trading, and the

FCPA.

• Prior to joining Jones Day Joan was the longtime chief counsel of the Division of Enforcement

at the SEC. During her 24-year career at the SEC, she played a key role in establishing

enforcement policies at the agency and worked closely with the Commission and senior SEC

staff. Her substantive experience extends across the full range of Division of

Enforcement matters including corporate disclosure, insider trading, investment companies

and investment advisors, broker dealers, and the FCPA. She oversaw the drafting of the

Enforcement Division Manual and played a significant role in recent organizational changes in

the Division.

• Joan also served as a key liaison between the Division of Enforcement and other regulatory

authorities including the Department of Justice, Commodities Futures Trading Commission,

federal banking regulators, and state securities regulators. Joan led Wells meetings

and settlement negotiations of thousands of SEC enforcement matters.

• Joan frequently lectures on SEC topics related to Enforcement, Dodd-Frank, financial

institutions, disclosure, FCPA, and insider trading.

• Joan is a member of the board of trustees of the Legal Aid Society of Washington D.C.

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Anti-Corruption Due Diligence Goals

• Identify corruption-related risks arising from the transaction

• Confirm anti-corruption contractual representations

• Determine feasibility and cost of implementing adequate compliance measures after acquisition

• Evaluate whether to adjust personnel, contracts, markets and relationships

• Begin communicating compliance message to target management and employees

• Document good faith inquiry

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Foreign Corrupt Practices Act (“FCPA”)

• Applies to

U.S. citizens, nationals and residents

Business entities incorporated or located in U.S.

Issuers of U.S. securities

Those who take action in the U.S.

• Generally prohibits

Payment or offer of payment, whether direct or indirect

To a foreign government official, including a manager of a

state-owned enterprises

With a corrupt motive

For the purpose of influencing official action, acting in

violation of a lawful duty or securing an improper

advantage

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Variables in Anti-Corruption Due Diligence

• Whether FCPA due diligence is necessary (risk

assessment)

• Who will conduct the diligence

• What topics to explore

• How much evidence and certainty to demand

• What procedures to use

• Timing and impact on closing

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Categories of Risks to Assess

• Legal

Possible successor liability for the prior acts of the acquired company

• Compliance

Potential continuation of inappropriate pre-acquisition conduct

Ongoing legal and reputational exposure

• Financial

Value of the acquisition

Timely completion of the transaction

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Risk Assessment: Understanding the Target’s Business • Where does the target do business?

Corruption index

• Who owns and controls the target?

• With whom does the target do business?

Foreign governments

State-controlled economies or industries

Industries known for corrupt activity

• How does the company do business?

Sales agents

Distributors

Other third parties

• What regulatory permissions and approvals does the company need to do business?

• Who at the target interacts with government officials?

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Typical Due Diligence Process

• Triage: Is FCPA an issue in the transaction?

• Scoping and preliminary analysis

Telephone call

Org charts

• Comprehensive information and document request

• Analyzing public information

• Gathering corporate intelligence (if appropriate)

• Accounting analysis

• Face to face interviews

• Follow up

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Practical Advice

• Early telephone interview of (or informal kickoff

meeting with) relevant management at target

• Comprehensive document and information

production

• Coordination and cooperation between lawyers,

accountants and consultants

• Face to face interviews

• Careful attention to privilege protection

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Document and Information Request

• Critical to effective due diligence

• Resist the urge to pare back the requests

Many requests are easily answered

• Form of response is less important than substance

Interviews may be more efficient

• Categories of information

Corporate background and government regulation

Principals and ownership

Use of agents and third parties

Anti-corruption policies and procedures

Financial relationships with officials and employees of other companies

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Evaluating the Target’s FCPA Compliance

• Tone at the top

• Effective risk assessment

• Appropriate standards, policies and processes

• Adequate communication and training

• (Dis)incentives for (non)compliance

• Sufficient monitoring and auditing to detect

noncompliance

• Compliance officer independence and resources

• Effective investigation of alleged corruption

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Completing the Diligence Process

• Synthesize and analyze the information and documents

collected

• Conduct thorough interviews of relevant individuals

Set the proper tone: Non-confrontational but

comprehensive and probing

• Follow up on problematic issues

• Assess whether additional procedures are necessary,

including full-fledged internal investigation or self-disclosure

• Document conclusions and actions taken

• Incorporate findings into ongoing compliance and remediation

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Conclusion

• FCPA due diligence must be risk-based and

proportional

• Properly implemented, appropriate diligence

minimizes risk and maximizes value

• Failing to conduct necessary due diligence can have

catastrophic consequences

• Organized and deliberate procedures, carried out by

capable professionals, are necessary to complete

diligence in a timely and accurate manner

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Leveraging Access to M&A Capital

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The M&A Financing Matrix

W/ seller financing component

• Deferred payments

• Earn - outs

• Installment sales Financing the acquisition

W/o seller financing

Asset - based lending

• Tangible assets

• A/R

• Projected cash flows

• Revolving lines of credit

• Term loans

Debt

• Asset - based Commercial

lenders

• Insurance companies

• Merchant bankers

• Sale/leaseback transactions

W/the assistance of

investment bankers

• Role

• Fees

• Timing

Equity

• Venture capital

• Private placement

m e m o r a n d u m s

• Strategic investors

• Buy - out funds

• Preferred stock

• Common stock

Senior debt

Convertible debt

Subordinated debt

W/o the assistance

of investment bankers

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Strategic Range of Options

52

1 Buyer uses

Its own cash or securities* to pay seller

2 Buyer uses cash/ securities and seller provides some financing through notes and loan-outs

3 Buyer provides equity for 25 percent of purchase price and balance is provided by senior lender—a revolver for the deal and post-closing working capital

4 Buyer provides equity for 24 percent of purchase price, with 50 percent from senior lender and 25 percent from subordinated lender

5 Buyer provides equity for 30 percent of purchase price (which must be raised through a securities offering or negotiations with a buyout fund) and 50 percent from a senior lender and 20 percent from a subordinated lender

6

The total purchase price is a combination of : • cash from buyer (equity) • notes taken back by seller • securities of the buyer • cash from the senior lender • Cash from subordinated lender • cash from equity source, such as buy-out fund, PPM, or venture capitalist

Simplest Most Complex

*Although paying the seller with your own stock appears to be the simplest option, be sure to work with counsel to ensure that these shares are properly issued and authorized and That the impact on valuation and dilution is considered carefully.

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Ten Questions All Types of Sources of M&A Capital Are Likely to Ask 1. How much can I make?

2. How much can I lose?

3. What is my exit strategy from this deal?

4. Who else says this deal is viable? (Risk mitigation/credibility)

5. Does the acquiror already have resources at risk? (Skin in the game)

6. What other value (beyond money) can we bring to this transaction on a post- closing basis?

7. Can I trust this management team?

8. Is this company’s target market large, growing (not stagnant or shrinking), and reachable?

9. Will the combined companies have a sustainable competitive advantage – as a result of either operational effectiveness/efficiencies or its strategic positioning or its intellectual capital or other barriers to entry?

10. Is the target’s business, revenue, and profit model credible, verifiable, efficient, and sustainable?

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What Are Equity Sources of Capital (all types) Really, Really Looking For In A Company and Its Team?

• Is your mindset/governance truly open to investors (and their desired covenants)?

• Clear understanding as to who is the customer and what are they buying and why are they buying it at this price

• Ability to cross-sell and up-sell a base of strong and loyal customers

• Ability to extend product lives and build brand

• Ability to increase prices and widen margins

• Strong and effective sales and marketing team (beyond the founder)

• Ability to check your ego at the door

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How Will The Proposed Transaction Be Perceived By The Source Of Capital?

55

Wave of the Future (But Not Yet Ripe)

Interesting But Not Our Niche

Right Place, Right Time

(Here & Now)

Interesting But No $

To Be Made (Business Model

Flaws)

Yesterday’s News

___________

Market

Passed You By

(Dead in the Water)

vs. vs. Keep Us Posted

(Term Sheet Imminent) (Ask for Another Look In A Few Months)

Ask for Referral

Great Concept, Wrong Team

Fill In Gaps

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Understanding The Capital Formation Strategic Planning Process

• Capital Formation Strategic Plan ≠ Business Plan

• No “Emperor’s New Clothes” – Must Have A Realistic Assessment of Current Growth Opportunities

• Capital Must Be The Fuel That Will Make Your Company Bigger/Better/Faster/More Profitable or Investors Will Take A Pass (Your job is to demonstrate and prove the investment thesis in your Business Plan and presentations)

• Understand both the quantitative and the qualitative “cost” of capital

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Understanding The Capital Formation Strategic Planning Process (Cont’d)

• Capital Formation is a Process (in multiple parts) not an

event

• Be prepared to invest time and resources into the capital

formation process

• Have the right advisors in place

• Be realistic in your valuation expectations (reflective of

industry trends, market conditions, growth plans,

operating margins, etc.) to avoid looking like a “pie-in-

the-sky” entrepreneur

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Developing An Overall Capital Formation Strategy

• Debt vs. Equity vs. Hybrid

• Market Conditions

• Proposed Allocation of Proceeds and Sensitivity Analysis

• Analysis of Current Balance Sheet

• Development and Analysis of Forecast and Growth Projects

• Needs Analysis/Timetable (Openness to Staging)

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Key Questions To Address To Determine The Right Type of Capital To Be Raised

• Before exploring the different kinds of financing available, you should thoroughly understand the fundamentals of preparing a plan because regardless of what kind of capital you’re raising—or how– any lender, underwriter, venture capitalist, or private investor will expect you and your management team to be able to prepare a meaningful business plan.

• The plan will have to address specific financial questions, such as:

• What market problems and financial opportunities have you identified?

• What services, products and projects are planned to exploit these opportunities or solve these problems?

• How much capital will you need to obtain the resources necessary to bring these projects to fruition?

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Key Questions To Address To Determine The Right Type of Capital To Be Raised (Cont’d)

• How soon do you really, really need the money?

• Exactly how will you allocate the capital? How will this infusion of capital increase sales, profits and the overall value of the company?

• How will you meet your debt service obligations and provide a meaningful return on investment to your investors and lenders?

• How much equity in the company are you offering to investors? How is it being valued?

• What “exit strategies” will be available to the equity investors?

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Strategic Assessment of Current Capitalization Table and Shareholder List

• Politics

• Perceptions

• Expectations

• Controls and Restrictions

• Rights of First Refusal

• Anti-dilution Rights

• Disenchanted or Distressed Shareholders

• State law protections for minority shareholders

• Down rounds

• Willingness to provide additional capital or “piggyback”

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Cost of Capital Is Often Dictated By Source of Capital

• Venture capital firms

• Strategic Investors

• Corporate venture capital divisions

• Private Placements

• Private Equity Funds

• MBO/LBO/ESOP and Specialty Funds

• Hedge Funds

• Super Angels and Angel Investing Clubs

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Key Strategies for Negotiating M&A Financing Deal Terms

• Negotiate short-term, think long-term

• Understand the key differences between valuation/price vs. terms, conditions, covenants and controls

• Assess impact of conditions and covenants on your management style, leadership and internal systems

• Understand why the investor finds your deal attractive

• Research other recent deals and their track record

• Be cognizant (but not controlled by) current market conditions

• Understand the impact of these proposed terms on current investors and your corporate culture

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