16 June, 2011

Private business exit: Q13b. How do you manage the sale process? Part II

Continuing our series on selling a mid-size privately-held business, in Part I of question 13 we looked at some of the choices for the actual sales process. Now let’s look at a typical process (although there are many variants):

  • Contacting the potential buyers, often with a teaser (written or verbal) which doesn’t identify the company or give too much away, just enough to get them to sign a confidentiality and good behaviour agreement in order to get the next level of information.
  • Sending out a brief 2-4 page overview of the business, to get expressions of interest in bidding and, sometimes, proof of substance that they have the wherewithal to buy the business.
  • Sending out a detailed information memorandum describing the business, with ample details to enable an indicative bid to be made.
  • Selecting a short-list of bidders to enter negotiations. This is where things can get tricky, because indicative bids are non-binding, and some competitors can make high bids just to get into the next stage.
  • The next stages can go in various orders: site visits, executive presentations, due diligence (thoroughly going over all your records and learning all your secrets), preparation of final binding bids, negotiation of sale agreements. Some buyers like to get a deal done, subject to due diligence not showing anything untoward, others want to do due diligence before committing to a price. Some do it all at the same time. Although it’s your process, it’s here you might need to be flexible.

Most executives and owners have limited experience of business sale. By now, if you’ve followed this series from the beginning, you’ll have realized that planning, preparation, execution and coordination form a huge task. We’ve already looked at selling the business yourself or using an agent. You should most definitely involve your accountant and your lawyer early in the process. However, they can’t do all that other stuff we’ve been talking about throughout this series, and your executive team is busy running the business, remember. So that means it’s probably down to you.

However, you can bring in help, to advice you and to manage the process. Just watch out, though - there are a lot of wannabees out there. Ask - and check - about experience, reputation and integrity. Consider using a specialist M&A lawyer; a great deal one costs big bucks, but can really make you money.  Peter Castle has been my big-hitter lawyer on several major projects over the years.  He fits into that rare category of “expensive, but worth it”.  ISAMBARD can provide strategic advice and interim executive resources before, during, and after the sale/acquisition - on either the buy or sell side. I like to think we’re "expensive, but worth it" too!

First posted October 22nd, 2008

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