- Seller representation in acquisitions
- Mergers
- Directed buyer acquisition search
- Industry valuations
- Increased business valuation through add-on opportunities.
- Divestitures
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Selling Your Business- The Process -
T he process of successfully selling your business is a complicated, emotional and time consuming one. Hiring a qualified Investment Banking firm like Aspen Mergers & Acquisitions to guide you through the process is the first step in the “post decision to sell” period. This signals to potential buyers that an owner is not only
You could choose to go it alone without representation. You could also choose to perform surgery on yourself. Neither is a very good idea.
serious, but that the sale will have the highest probability of getting across the finish line successfully. You could choose to “go it alone” without representation. You could also choose to perform surgery on yourself. Neither is a very good idea.
Once a business owner has made the decision to sell the company, and has chosen a firm like Aspen to take them to the market and represent them, the clock starts ticking on the process. Generally, we tell our clients to mentally allocate a year for the sale to be completed. If is very possible that it can take a shorter period of time- six to nine months- but invariably it seems to stretch out to that year time frame. This happens for a variety of reasons some of which are in the control of the seller and some of which are not. The time estimates included below should be viewed as rough guidelines rather than absolutes.
Generally, we tell our clients to mentally allocate a year for the sale to be completed.... This happens for a variety of reasons some of which are in the control of the seller and some of which are not.
The first month of the process is spent on gathering information about the company and putting a document together that accurately portrays the business. This document is known by a number of different monikers- CIM, offering, book or business summary, to name a few. This serves as a comprehensive document that gives a potential buyer an in-depth look at all aspects of the organization. Along with a blind profile, or teaser, they are critical pieces of the sales process and will serve to either capture the attention of a potential buyer and give them the relevant information they need to determine their level of interest, or they can be a wasted exercise that generates a lot of false interest or worse yet, fails to attract qualified potential acquirers. This time is also spent in discussing who the right potential acquirers are and putting an appropriate list together. The next month or two is spent initially contacting the potential acquirers, signing NDA’s getting the business summary to them, answering various questions and getting additional information to these potentially interested firms.
The IOI’s purpose is to make sure that the two sides are at least in the same ballpark with respect to company value and general transaction structure before spending the time and money on a site visit.
The next phase of the process involves calls with management, additional information gathering and site visits from prospective acquirers. Some buyers will prefer to present an “IOI” or “Indication of Interest “ prior to an actual visit, and some choose to skip this step. An IOI can be viewed as an “LOI light”- a document that gives a preliminary and general outline of the overall value and structure that a perspective buyer has put on the company. The IOI’s purpose is to make sure that the two sides are at least in the same ballpark with respect to company value and general transaction structure before spending the time and money on a site visit. This phase of the process usually takes several months as gathering, disseminating and reviewing information is time consuming in and of itself. When you add in the co-coordinating of schedules on both sides for calls and visits it is easy to see why this phase tends to be so time consuming.
Concurrent with, and extending beyond the period described above is the period spent receiving, reviewing and responding to actual offers for the business, normally referred to as a Letter of Intent or “LOI”. An LOI can range from a single page to a fifteen page document. In our opinion a one pager is far too short and a fifteen page LOI is far to detailed. We believe that all the relevant aspects of an offer- at this point -can be covered in a three to five page document. You want it to be comprehensive enough to cover the major deal points but you don’t want it to try and negotiate every last point- that is what the next period is for. Once the seller has determined who the best buyer is, and an acceptable LOI has been negotiated and executed, the final, and most difficult phase of the process begins. This is referred to as the “Due Diligence” phase.
Once the seller has determined who the best buyer is, and an acceptable LOI has been negotiated and executed, the final, and most difficult phase of the process begins. This is referred to as the “Due Diligence” phase.
By executing an LOI a seller is not only agreeing to sell the business to the buyer on the terms and conditions outlined, but they are also agreeing that they will make a “good faith” effort to do so. Inherent in making a “good faith” effort to sell the business to one party means that they cannot be simultaneously talking with other potential buyers. This is called a ‘lock out” or “exclusivity” period.
Generally an LOI is written for a 90 day period of time which is intended to cover the period needed to perform all the necessary due diligence as well as to negotiate and execute all of the legal documents involved- asset or stock purchase agreements, employment contracts, non compete agreements, building leases, seller notes, earn outs, etc…. Rarely, in our experience, is all this able to be accomplished with the initial 90 day period. In many cases an LOI is extended out for another 30-60 days. Successfully getting through this phase and getting across the finish line is by far the most difficult aspect of selling a business and can only be accomplished if all parties approach this with a proper “win win” attitude rather than it being one of a “zero sum game”. All parties must exhibit patience, flexibility and above all the willingness to compromise. When you throw holidays, vacations and coordinating multiple peoples schedules on to the above time lines, it is easy to see how this process can and usually does stretch out to a year. Selling a business is not easy, but having a firm like Aspen Mergers representing you substantially increases your odds of being successful.
Robert Vogl
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