Stages From Screening to Closing
A deal moves through a typical sequence, from screening possible targets and a first approach to signing and closing. At each stage specific decisions are made, and particular people make them.
Screening: deciding which targets deserve attention. Screening is the first stage. A buyer looks across the companies that could fit its goals and narrows a wide field to a short list. The decision here is which targets are worth pursuing at all. It is usually made by the buyer's corporate development or strategy team, with senior management agreeing on the criteria. Screening is cheap compared with later stages, so rejecting poor fits early saves time and advisory cost.
First approach: deciding whether and how to make contact. After screening, the buyer decides whether to contact a short-listed target and how. The approach may come directly from senior executives or through an adviser. The decision to approach is typically taken by senior management of the buyer, often with board awareness. The target's own management and board then decide whether to engage, since they have a duty to consider what is best for the company and its owners.
From signing to closing: committing and completing. Between the first approach and signing, the parties explore the deal further, through steps such as due diligence and a letter of intent, covered in the next two lessons. They decide whether to proceed on the terms discussed, and each board decides whether to approve the agreement. Signing is the moment the parties commit to the agreement. Closing is the later point at which the transaction is completed and ownership actually passes. The gap between them exists because conditions, such as required regulatory or shareholder approvals, usually must be met first. Signing is decided by the boards and senior management of both sides; closing follows once those conditions are satisfied.
Putting the stages in order and naming a decision for each. The stages run in order: screening, first approach, then signing, then closing. Each stage has a defining decision: which targets to shortlist, whether to make contact, whether to sign on the agreed terms, and whether the conditions are met so the deal can complete.
