Our Business / Selling a Company

Selling a company involves risks to the business and uncertainties for  management

and owners. When we are engaged to sell a company, our task is to reduce the

risks and obtain the best value  available in the market.

 

The process always has the same seven steps regardless of

the nature of the seller (family business, private equity firm, private company)

what is being sold (corporate division, corporate assets,  an entire company)

the specific business activity involved (manufacturer or service provider)

the nature of the buyer (domestic or international, strategic or financial)

 

Seven Steps to Concluding a Sale:

 

(1) Preliminary Strategic Discussions:


Initial meetings help us  understand the client’s business operationally and financially as well as the client’s preferences in conducting a sale. Our objective is to insure that everyone is on the same page and to minimize surprises later on.  We want to know about our client’s strengths and weaknesses in advance. We need to define how widely we may search for buyers, how many firms we may contact, who we may not contact. We want to verify that  no critical management decisions need to be taken during the selling process. We want to understand our client’s financial objectives and the rationale behind them both to have confidence that they are reasonable and to estimate how long the sale may take. These investigations are both thorough and complete. They are designed to insure that once the selling process begins it can unfold seamlessly.

 

 

(2) Preparation of Selling Documents:


We believe most strongly that initial meetings between principals should always be held between informed buyers and informed sellers. So, before we begin, we devote a large block of time to preparing a full-scale information memorandum (IM). This document (usually 25-50 pages long) informs the reader about the seller’s business operations (products, markets, customers), its competitors, its management, its financials and its projections. The IM is the basic tool used to inform potential buyers about the seller’s business. In addition, we review and if necessary modify the seller’s current business plan, prepare a critique of projections (often with sensitivity analyses) and examine possible synergies or risks associated with a small group of targeted buyer-candidates. Finally we prepare a timeline for the sale process with benchmarks and a value range acceptable to our client.

 

 

(3) Identification of Potential Buyers:


We identify buyers using our extensive database and/or by a thorough analysis of the client’s competitive environment. Our goal is to identify buyers for whom the selling business will be the most valuable. All buyer candidates must be approved by the client before making initial contact.

 

 

(4) Initial Contact with Potential Buyers:


Buyer candidates are first shown a blind profile written so as to make identification of the seller difficult while not distorting the business description. After we receive a clear statement of interest and after signing a Non Disclosure Agreement acceptable to our client, we disclose the seller’s identity and provide a numbered copy of the IM. When possible, we prefer to conduct the entire sale process in private away from public view. After reviewing the IM but before the first face-to-face meeting, potential buyers are asked to submit non-binding indicative offers, usually within a high-low range.

 

 

(5) Management Presentations, Data Room and Site Visits:


After consulting with our client, we select those companies to invite to a first meeting, typically a presentation by the seller’s senior management. Following the Management Presentation, we reduce the buyer-candidate list again and give this group (usually 3-4 companies) access to the data room. The data room process has three objectives:

To document and justify the value of the selling company and the accuracy of the seller’s assertions about the company;

To maintain and build confidence between the seller, the buyer and the seller’s management

To highlight any variances between actual and stated projections or liabilities and to identify other information that could result in a lowering the offering price.

 

Site visits may be organized before or after the data room according to our client’s preference.

 

 

(6) Final negotiations:


After the data room closes, buyers are asked to confirm and/or finalize their offers. A single candidate is then designated for exclusive negotiations during a defined period, usually about two months. During this period we work with both buyer and seller to conclude a Letter of Intent and a Purchase and Sale contract. If negotiations are not completed within the exclusivity period, we retain the option of extending the time limit or granting exclusivity to another buyer.

 

 

(7) Closing:


Once all terms of the transaction have been agreed to by the principals, we work with accountants and lawyers for both sides to oversee and manage the preparation of all final documents until the transaction is completed.

 

ADAMS & ROYER

ADAMS & ROYER

ADAMS & ROYER