The Five-Step Process
1. The Project Brief
The Firm will meet with the client to complete a detailed and confidential brief, covering all aspects of the company and a prospective buyer profile. We always think laterally and beyond the obvious. The brief is an internal document from which we draw all the information to take the company to market.
2. Exhaustive Research
The Firm will rely upon a number of databases to identify prospective purchasers. The nature of many buyers can be a surprise to many sellers. On average, we initially identify over 200 prospective purchasers for each client’s business before we take it to market.
3. Prospect Generation
The Firm will confidentially contact the CEO/Owner of every viable prospect identified in the research stage. The purpose of this first contact is to introduce the idea of an acquisition to each prospective buyer. The client company will not be revealed at this time, but rather we will disclose some key characteristics of the company in order to highlight the unique synergies that would benefit the prospect in an acquisition. Unlike traditional methods, the goal of this first contact is to sell a meeting- not the company. There are no valuation discussions at this stage.
4. Qualification and Bidding
Based on the information gathered, we find that 200 prospective buyers will typically be filtered down to eventually two to five strong candidates.
It is very easy to hand over all the information to the prospective buyers early in the process. The Firm; we maintain control. We begin by trading information with the prospective buyers. We ask questions and slowly feed the prospective purchasers more benefits/synergies that the company can offer a strategic acquirer.
Most sellers that we represent tend to be entrepreneurial, which is not surprising, given that they are generally self-made. More often than not, the top person in the acquiring company is usually also quite entrepreneurial as well. It’s important to note because most entrepreneurs tend to be driven by the “feel” of the deal.
Business owners must ask themselves if they could “work with” the buyers – either in negotiations and/or as an employee after the deal is sealed.
The following is our recommendation for the competitive bid.
a. Each prospect will need to be informed that they are one of several companies with whom we are in discussions, so their bid will need to be competitive.
b. Be open-minded regarding the eventual deal structure. Generally speaking, the more flexible a seller is about the deal structure, the more the business will sell for because it reduces the buyer’s perceived risk. For example, if a seller is prepared to receive 80% of the proceeds on completion of the deal and 20% in one or two years linked to some performance criteria in an earn-out, then he or she has reduced the buyer’s risk. This may increase the overall consideration.
c. The Firm will facilitate and lead every meeting and take each prospect through a proven bidding process.
5. Concluding the Deal
The Firm will continue to coordinate the process, organizing and facilitating meetings between buyer and seller and their respective lawyers and financial advisors. The Firm will coordinate the due diligence process to ensure that the seller and buyer have a meeting of the minds – so both understand what they are agreeing to. The Firm will remain on the seller’s side so that our client gets the best deal possible.
It can be an emotional process and you might only get one chance to sell your business. Make sure you use a proven process.