SELL SIDE SERVICES
THE SELLING PROCESS
STEP BY STEP OUTLINE FOR PROPER MANAGEMENT OF THE SALE PROCESS
What are your needs and objectives? Some options include: sell and retire, sell and remain with the company, take on a partner, capital infusion, etc. Thinking through this in advance will allow you to focus your efforts.
The seller will need to gather financial, as well as general information on all aspects of the business. Proper preparation is crucial for the best presentation and is the first step in establishing the confidence of a buyer. Adequate information will enable buyers to gauge their level of interest.
MAXIMIZE FINANCIAL PRESENTATION:
Financial statements are generally prepared for tax purposes. A buyer must be educated to accurately interpret financial statements (as well as the recast) in order to recognize the company's true worth. The recasting of financial statements requires identifying and adjusting for a normalized owner's salary and discretionary benefits, as well as one-time, non-recurring, and non-applicable expenses.
Determining the fair market value of a company is an involved process that takes into account many variables. Proper consideration must be given to the company's strengths, assets, historical financial performance, and reasonable projections. Purchase price comparisons should be made with like-kind companies that have sold within the industry, within a similar time-frame in the market. By determining the highest price a fully informed buyer is willing to pay for the company, the risk of losing a timely sale by overpricing the business, or "leaving money on the table" by undervaluing the business, is avoided.
PREPARATION OF A CONFIDENTIAL OFFERING MEMORANDUM:
The business must be properly packaged with all applicable records and facts organized and documented. This ensures presentation in the most favorable light while educating buyers on the many intangibles inherent in the company, thus raising the perceived value to the acquirer. These intangibles include name recognition, market niche, vendor relationships, operation and production systems, distribution channels, customer loyalty, trained, skilled employees, and more.
BUYER IDENTIFICATION STRATEGY:
Determining the best strategy for marketing the company is crucial. What type of buyer will perceive the greatest value and synergies? Identifying the right buyer can significantly impact the business' valuation.
Identify and be prepared to address issues, such as leases, regulations, licensing, key employees or other concerns that might apply to your specific situation. Failure to address these issues early in the process can potentially lead to the loss of qualified buyers and months of wasted activity.
Determine the most likely type of buyer and how to best market the business. There are a number of different marketing strategies available which will provide the necessary exposure while maintaining confidentiality. There are steps to guard against competitors, employees, vendors, and customers finding out about the pending sale of the business.
Walden qualifies potential buyers as to their interest level, management skills, cultural fit, and ability to meet the financial requirements of the transaction. Confidentiality will be maintained with interested buyers until all of these aspects are satisfactorily addressed.
Provide the potential buyer with the opportunity to visit the facility. Generally there are multiple site visits. This is a good forum for the buyer and seller to develop a favorable rapport.
Upon a "meeting of the minds" over the key transactional issues, a written offer to purchase should outline the purchase price, terms, conditions and any contingencies. This is generally in the form of a Letter of Intent or Term Sheet. Proper compliance with this step can save thousands of dollars in legal expenses.
An offer is usually contingent on the buyer's professionals verifying the accuracy of the seller's financial and operational representations.
After all issues are resolved and the buyer's accountants and attorneys are satisfied with the representations, contracts can be drafted and negotiated.
This is when goals become reality!
This typically involves a period of cooperation in which the seller will assist the buyer in affecting a "seamless" transition, including transferring of key relationships and proprietary information needed to successfully operate the business.