• Michael Shaw

What to Expect with a Sell-side Process

Is it time to sell your business?

Although no two deals are exactly alike, you can prepare for a sale by getting to know the typical process that leads to successful exits.

In this article, we’ll review the sell-side process, which can take six to eight months from the time you hire an advisor to when you sign on the dotted line. An experienced sell-side advisor will have an understanding of your transaction goals and achieve consensus with shareholders and board members to ultimately finalize a successful deal.

There are three broad phases, with some important factors to consider in each:

I. Preparation | 30-45 days

This is the foundation of a process. You and your advisor will collect necessary due diligence information to create the marketing materials for a sell-side process and the data room that will be used later in buyer due diligence. The information collected represents all aspects of the business and can be substantial, so maintaining good records is especially important with an M&A process. The marketing documents prepared include:

  • Teaser: a one-page overview of your company that redacts sensitive identifying information such as name and location

  • Letter: introducing you and your advisor

  • Confidential Information Memorandum (CIM): a marketing presentation with financial and operational details, distributed only to interested acquirers who have executed a Non-Disclosure Agreement (NDA)

More often, third party documents like sell-side Quality of Earnings reports will be included along with the CIM to confirm various aspects of the business. A final part of this phase includes building the prospective buyers list. Your advisor will carefully cultivate a list of strategic and financial buyers based on transaction goals of your company. This list will be culled from a variety of sources, including the advisor’s own contacts, databases and past deal experience.

II. Marketing | 45-60 days

In this phase, potential buyers will be contacted.

After potential buyers have reviewed and analyzed the marketing documents provided, your advisor will communicate your objectives and expectations. Interested buyers will then submit Indications of Interest (IOI).

Based on the information outlined in these IOIs—initial valuation ranges and deal structure, among other high-level proposals—a select number of buyers, usually four to eight, will be invited to visit your company. Your advisor will schedule management presentations, usually over a two-week period.

Throughout this marketing phase, it is important to communicate with appropriate stakeholders and to maintain focus on running the business.

III. Closing | 60-90 days

Prospective buyers will submit Letters of Intent (LOI) outlining proposed pricing, form of payment, legal transaction structure, escrow arrangements, liabilities to be assumed, due-diligence process and timing to close, among other specific details.

You and your advisor will conduct due diligence on potential buyers and analyze risks of

transaction contingencies before selecting proposals for final negotiations.

An LOI will be signed with one potential buyer and then they will have 30 to 90 days to do their diligence on the company, bringing outside consultants such as legal, accounting and insurance. During buyer diligence, you and your advisor, along with your M&A attorney, will negotiate definitive agreements with the buyer. All parties involved will obtain necessary approvals and execute legal documentation.

When all else is completed, you will receive consideration and close the transaction.

Key Takeaways

The more organized and knowledgeable you are upfront, the better off you will be throughout the process. Keep in mind that, although six to eight months is typical, speed can depend on your urgency to sell, market conditions and acquirer considerations, among other factors.

M&A advisory is a client service business and the very best will understand how important these transactions are to their clients. Advisors must limit distractions from the sale process and allow management to focus on their “day job” of operating the business.

Remember, this is your sale process and ultimately you will make all the important decisions. Ask questions of your advisor and be attuned to the process.

Matthew Roberts is Vice President at Copper Run. He specializes in the business services, distribution and manufacturing sectors.

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