Most, if not all, owners of privately held businesses will consider selling their company at some time. And they should. Selling a company takes risk off the table. It enables owners to cash in on years of hard work and move on to what’s next. It may also mean an entirely new growth curve for the business and long-term security for its employees. Ready to sell your business? Read on to learn everything about the sell-side M&A process?
Let’s start with a look at the business valuation spectrum.
Be acquired, Don’t be for sale
Sell-Side M&A is the process of being acquired, not the process of being “for sale”. It depends mostly on business valuation. Sure, plenty of other variables influence the viability of an acquisition for a buyer. However the potential for positive future growth and returns are the objective. Naturally, you are wondering what is my business worth? It depends on the level of alignment you have achieved and maintain in day-to-day operation. Learn how to reach your full potential with an alignment model.
You probably already have a view on the value of your business. Will buyers have the same view on your business valuation? Not likely. So what can you do about it? Discover what makes a strong acquisition target.
Make Your Acquisition A Cause
Before you start the sell-side M&A process there are a number of things to prepare for. Establishing the seller’s objectives is the first step. Second prepare a relevant list of M&A sale consideration topics for sellers. Third, learn how to establish value in the M&A sale process.
The more professionally run the M&A sell-side process is, the higher the likelihood you will achieve the highest market value from the best buyer for your business. Every corner that is cut in the process will elevate the risk of getting a deal done at all – let alone a premium valuation.
How has running a thorough, tight and professional process helped other sellers? This is the helpful information we provide for business owners considering selling their business within the next year or so.
What does the sell-side M&A process involve?
Who. Who is the best buyer for my business?
What. What steps need to be taken to get a deal done with the best buyer for my business?
Why. Why do shortcuts add risks to getting a deal done?
Where. Where do I find the best buyer for my business? Scale vs. Scope
When. When will a deal get done if I start talking to buyers today?
What are the steps involved in running an optimal sell-side M&A process that maximizes value in minimum time with no disruption to the seller’s business?
- Confidential Information Memorandum (CIM)
- Buyer List
- Process Letter
- Confidentiality Agreement
Related: The Purpose of a Confidential Information Memorandum
Every sell-side M&A process needs to lead with a written Confidential Information Memorandum (CIM). Want to attract investors for a partial sale? Want to negotiate an outright sale with strategic or financial buyers? If you want to sell your business you must run a professional sell-side M&A process. An effectively written CIM is vital for a successful sale. Why?
Establish common ground.
Because using a relevant and effective CIM, or “book” is the only way to tell prospective buyers how to view your company and its amazing opportunities for growth. How do you write a CIM? Moreover think: who should write your CIM?
Valuation: Make Informed Decisions
Helping business owners realize their goals from selling a business is a complex process that requires focus, objectivity and experience. During preliminary discussions with prospective sellers, ALIGNMT works closely to help understand the motivation for a sale and to provide insight to market opportunities, trends and valuation factors.
Business owners typically underestimate the importance of preparation, documentation and positioning when considering a sale. We don’t.
Our process begins with the Valuation & Qualification Analysis, a meticulous yet comprehensive evaluation report custom prepared to identify company specific value enhancing factors, industry wide benchmarks and trends, financial and economic perspectives on value and risk considerations. Combined, these factors determine what the business is worth in the market.
Positioning: Know the Market, Create Alternatives
Dedicated client teams prepare a detailed Confidential Information Memorandum that describes the business, highlights its strengths and competitive advantages, and outlines future growth potential in detailed projected financial statements. Utilizing our extensive network and proprietary database, ALIGNMT prepares a well-researched list of potential acquirers that includes strategic buyers, foreign corporations, and private equity groups. Managing the sale process the team’s goals are to:
- Maintain confidentiality
- Contact only qualified buyers who have the means to consummate a transaction
- Shield management from the marketing minutiae, allowing it to focus on operations
- Manage an efficient timeline, formalizing the buyer pool quickly
- Create an auction environment with several buyers bidding against each other to acquire the company
- Select the winning bid and negotiate the components of an agreement
Negotiation: Driving a Premium Valuation
After the selection of the most desirable buyer, we continue to support the sale by negotiating the agreement in principle, formalizing the transaction with the definitive agreement. ALIGNMT plays a critical role during final negotiations and buyer due diligence when transactions often stumble.
We engage in asset based transactions, not securities transactions in compliance with the SEC’s M&A Broker rules.
Ian Shanno –
ALIGNMT’s approach to our sell-side M&A process was carefully designed, crafted and executed. Ian and his team took the time to learn everything about my company: its origin, history, people, strategy and future outlook and they wrote an amazing Confidential Information Memorandum that clearly presented all of the opportunities available to us. It also showed prospective buyers how our business could achieve even stronger growth when combined with the right strategic buyer. They made sure we understood what role valuation would play in the process and my decision and made it clear that we must know what to expect when we actually start talking to prospective buyers. It was an efficient process and Ian hit every milestone as planned, negotiating the best deal possible with the best synergistic buyer.