Our Process
Every business is unique so the process for selling each business differs. With some variation, our process of preparing a business for sale and selling it to a private equity group is as follows:
1. Meet With You To Understand Your Business
You live your business everyday. While running it might be second nature to you, it will take us (and a prospective buyer) some time to understand the basics of your business in terms of marketing, finance, management, and day to day operations. We will want to have an initial meeting and then a more involved meeting to talk to you and to learn a bit about how your business works. We do have prepared questions but we also will encourage you to tell us about your business in your own words.
2. Prepare a 20 To 50 Page Overview (Selling Memorandum)
Armed with the knowledge we gain from our conversations with you, and with knowledge of what our target buyers are looking for, we prepare a selling memorandum to present your company to prospective buyers. This overview will present the opportunity in the best possible light while answering most (probably not all) of the questions a reasonable buyer will have. Of course you will have the opportunity to review this document before it is shared with any prospective buyers. It will only be shown to serious buyers who have executed a stringent non-disclosure agreement (NDA).
We also prepare a teaser. The teaser is a very brief (1 page maximum) description of the opportunity without identifying characteristics such as geography and other specifics.
3. Contact Our Database Of Private equity groups
While the selling memorandum is being prepared we will search through our proprietary database of PEG buyers and their profiles, and choose those that are good candidates for acquiring your company.
When the overview is ready, we will contact those candidates with the teaser. Those who are interested will execute a strict non-disclosure agreement. Once they have done so, we will send them the overview.
4. Concurrently, Advertise In Several Places
Although we specialize in selling to private equity groups, we don't limit to PEGs. While approaching the equity groups, we will concurrently and discretely advertise your business through business publications such as the Wall Street Journal and other high end periodicals.
5. Sometimes Contact Strategic (Or Industry) Buyers
In some case, we will also contact other companies in your industry. However, before we do this we will clear it with you and give you the opportunity to take any company(s) you don't want contacted off of our contact list.
6. Other buyers
Occasionally we have non-PEG buyers in our database. These can range from businesses that we have done deals with before to wealthy individuals looking for a business to run.
7. Modified Auction
An offer to purchase a business is more complex than a simple dollar amount. For example which is a better-offer-- $2,000,000 in cash or $ 1,500,000 in cash with $750,000 additional paid over the course of three years at 6% interest? Different sellers would answer this question differently and even the same seller may have different answers based on the details of the deal.
There are other complexities to a business sale besides price and terms:
- how long will the current owner be required to stay with the company after the sale?
- at what salary?
- how long will the due diligence period be?
- what are the due diligence requirements?
- what will be the terms of the non-compete agreement be?
- will the employees be guaranteed employment?
- is the sale a stock sale or an asset sale?
- and more
We sell companies using a modified auction strategy. That is, we invite QUALIFIED buyers to make proposals in the form of a letter of intent. We then discuss each letter of intent with the seller and decide which are the most appealing and then negotiate with those prospective buyers. The decision of course is yours, but we will offer our advice as to which offer(s) look best and equally as important, which have the highest likelihood of closing in a reasonable period of time.
8. Signing the Letter of Intent (LoI)
The first binding step in the process is signing of a LoI. This is a legal document that in essence says the parties agree to the basic principles of a deal. Often, there are small issues that still need to be worked out after the LoI is signed, but at this point buyer and seller have an agreement in principle. The LoI is later formalized in a purchase & sale (P&S) agreement.
We figure that when the LoI is signed, our work is half completed. At this point our job changes from finding the best buyer and negotiating the best deal to shepherding the deal to a successful conclusion.
During this phase we:
- help with the due diligence tasks and responsibilities
- negotiate any loose ends not fully covered in the LoI
- co-ordinate buyer, seller, accountant, lawyer, investors, and various advisors
- put out brush fires. It is a rare deal indeed that doesn't have a few obstacles and bumps in the road of varying degrees of severity. Sometimes, our biggest job post-LoI is putting out the brush fires that are sure to come up
- keep the process on track by making sure everyone involved is doing what they are supposed to do to meet the agreed closing date
If you are considering the sale of your company now or in the near future, give us a call. We'll be happy to discuss this possibility with you without cost or obligation.
