Execution of the Deal

Execution is where the deal goes from "we want to do this" to "we have signed a binding agreement." The banker's role shifts from valuation and bid development to process coordination and financial-terms translation.

Follow-Up Due Diligence

The final round of diligence sharpens the bid and surfaces any items that should adjust price or change deal structure.

• Prepare follow-up requests: based on prior-round responses and remaining open items in the diligence tracker
• Coordinate buyer's advisors: accountants, lawyers, consultants, and operational teams working in the data room
• Manage target management Q&A: scheduled calls, written question-and-answer threads, and on-site visits to operating facilities

Final Bid Review With Buyer

The final bid review takes everything the buyer has learned in diligence and rolls it into the bid letter.

• Update valuation, accretion / dilution, and financing analysis: incorporate full diligence findings into the model
• Discuss required price adjustments: based on findings around working capital, quality of earnings, off-balance-sheet liabilities, litigation exposure, and regulatory issues
• Draft the final letter of intent (LOI) or definitive-agreement bid letter: the document that formalizes the buyer's binding-bid intent

Diligence findings that typically drive price adjustments:

• Working-capital deficit: target is sitting on less operating cash than the historical average → dollar-for-dollar purchase-price reduction or working-capital adjustment at closing
• Quality-of-earnings shortfall: reported EBITDA includes non-recurring items the buyer would not pay a multiple for → re-quote at the adjusted EBITDA
• Off-balance-sheet liabilities: pension underfunding, environmental remediation, litigation reserve → escrow holdback or indemnification
• Customer-concentration risk: top-five customer reliance higher than expected → escrow, earn-out, or walkaway

Fairness Opinion Preparation

For deals that warrant one, the banker prepares the fairness-opinion hand-off to the firm's fairness committee.

• Fairness-opinion mechanics: covered in Unit 12 (the unit dedicated to fairness opinions under the FINRA member-firm fairness-opinion rule)
• When triggered for buy-side:
  • The acquirer's board requests one (typical for transformational deals, related-party transactions, or board-protection purposes)
  • The deal structure (e.g., issuance of acquirer stock triggering an acquirer-shareholder vote) makes a fairness opinion advisable
• Hand-off: the buy-side banker briefs the fairness committee on the deal financials, the valuation work, and the diligence findings
• Purpose for the buyer's board: the fairness opinion supports the business-judgment-rule defense in any post-deal litigation challenging the directors' decision-making

Think of it this way: the fairness opinion is the buyer board's evidence that the directors did their homework. It does not bless the strategic decision; it confirms the price the directors agreed to pay is fair from a financial point of view.

Exam Tip: Gotchas

• Fairness-opinion preparation is HAND-OFF work, not a banker decision. The buy-side banker briefs the fairness committee with the valuation work and diligence findings; the committee independently reviews and delivers the opinion. The mandated independence is part of why the opinion is credible to the board.

Communicating Material Financial Terms to Legal Counsel and Accountants

The buy-side banker is the principal financial-terms interface to the acquirer's legal counsel and accountants during definitive-agreement drafting.

Material financial terms the banker translates for counsel and accountants:

• Purchase price and any adjustment mechanisms (working-capital adjustment, net-debt adjustment, indebtedness sweep)
• Consideration mix: cash, stock, mix, contingent value rights, earn-outs
• Working-capital adjustment: target working-capital level, true-up mechanism, and closing-balance-sheet process
• Escrow / holdback structure: amount, duration, release triggers
• Earn-outs: post-close performance metrics, measurement period, payment structure
• Financing commitments and triggers: committed financing letter, bridge availability, take-out conditions

Where each translation lands:

• Legal counsel: translates the financial terms into the definitive-agreement language (purchase price article, consideration article, indemnification article, conditions to closing); signing-to-closing mechanics are covered in Unit 13
• Accountants: translate the financial terms into purchase-accounting treatment, tax structuring, and pro-forma financial reporting

Exam Tip: Gotchas

• The buy-side banker is the principal FINANCIAL-TERMS interface, not the legal drafter. The banker negotiates and conveys the substance of the financial terms; counsel drafts the contract language. Mixing the two roles creates documentation gaps and inconsistent terms.