A company acquisition is a great selling option for owners of high-earning, high-growth companies that need more capital or expertise, or simply wish to sell the business to a larger company. Whether your goal is to raise capital for your growing company or find a strategic buyer to complete an acquisition, working with a broker who can guide you through the process is key. Representing yourself in this kind of deal can lead to all types of big and small disasters, so it is best to retain an advisor who has been through the process many times before and can guide you to a successful close. Although each particular company acquisition process might take a slightly different and sometimes recursive path, here are the basic steps in the acquisition process:
Steps in the Acquisition Process
Understanding Your Goals and Reviewing Your Options
How do you get started with the company acquisition process? In order to begin this process, you and your advisor will need to sit down together and conduct some important meetings.
These meetings begin with you and the advisor working together to understand your unique future goals. This involves reflection about not only financial well-being, but perhaps more importantly, achieving your career and personal goals. Overall, the focus of these meetings is to make sure you genuinely understand the impact an acquisition may have on you, those close to you and your company.
Once these goals are clearly refined, the business advisor can present the options available to you. This part of the process includes the basic logistical questions of determining ideal potential buyers, figuring out how long you want to stay with the company post-acquisition, capital needs, and tax implications, among other considerations.
Once this groundwork is covered, your business advisor can help you with a particularly tricky part of the company acquisition process: valuation. There are many ways to value a business, and an experienced advisor will help you to come up with an approximate value and the ability to meet your financial goals in the marketplace. As you go through the information gathering process, be sure that you have been collecting business-related documents, such as leases, tax returns and bank statements that you will need in due diligence to ultimately prove the value of your business. It is never too early to start gathering these important materials.
Planning and Marketing
Once you have agreed on a target market value with your advisor it is time to start packaging your opportunity. Before you can meet potential buyers, you and your business advisor will have to plan your strategy, properly package your business, and then actively market your company. Creating a multi-faceted plan involves determining which buyers to approach first, deciding on how to get the best price and figuring out how best to keep the acquisition confidential. Marketing the sale includes screening buyers and creating competition in the marketplace that could ultimately drive up your business’s value.
Prospective Buyer Introductions
This is the true initial stage of the company acquisition process, wherein brokers introduce you to potential buyers. It usually involves face-to-face and conference call meetings with the broker’s direct involvement. Since you may not be completely familiar with the process, an experienced business broker will also help you prepare before the meeting or call, and consult with you after to go over how the meeting progressed.
All buyers will be required to sign a confidentiality agreement, also known as a non-disclosure agreement (NDA). Through this document the buyer formally agrees to keep any shared sensitive information confidential.
Solicit and Review Letters of Intent (LOI’s)
Once you and your advisor have identified some potential prospective buyers and have signed confidentiality agreements, limited information will be shared with the buyers. In return, the buyer can send you a purchase offer in the form of a letter of Intent (LOI) and/or purchase agreement. You and your experienced advisor can then review and evaluate these offers in order to find the best opportunity. Then, you will proceed to negotiate the terms that are acceptable to you and your team of advisors, which typically will include your attorney and accountant.
Negotiate the Sale
Unlike small, single-buyer transactions, most of the larger buyers involved in the company acquisition process are experienced, professional buyers. It is extremely important to have a business advisor – a professional, experienced negotiator who knows the right questions to ask – on your side for this part of the company acquisition process. It is also important to have an accountant and attorney to work with you and your advisor through the process.
In this stage of the company acquisition process, the buyer will want to see some financial and legal records about your company in order to check the accuracy of your valuation and general worth of your business. Likewise, you will also be interested in seeing statements and documents from the buyer. A business advisor can help you determine what kind of information is necessary, the proper location for due diligence, and what to do if any problems arise.
Close the Deal
After due diligence is successfully completed, all parties are ready to close the company acquisition process, but there is still a little more that needs to be done. Many documents and schedules will need to be created to eventually close the transaction. These documents can make or break a deal and having an experienced advisor is critical. Then there is just one more thing: make reservations for the celebratory dinner!
After the closing, you and your advisor can review any loose ends like notifying employees, vendors and setting up the transition training for the buyers and their management team.
If you are ready for the company acquisition process, contact Transworld today. Transworld’s expert business advisors will guide you through the whole process, while they keep your intent to sell confidential and lead you to the best possible closing scenario.