It’s time to sell your business. However, you’re wondering what to do next. The best way to ensure the success of this important transaction is to implement a structured approach within a formal and professional sales process. And, throughout this process, consulting with a business transfer specialist will be crucial. They can help you begin your thought process, advise you in planning the transaction and guide you through each step.
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Assemble your team
It is important to draw up a list of the advisors who are familiar with the reality of your business: lawyer, accountant, financial planner, business valuation specialist, advisor specialized in business transfers, etc. You need a team to support and guide you.
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Review financial information and estimate the value of your business
At the beginning of their mandate, the business transfer specialist will need to obtain all the information necessary to know the nature of the business, your financial results, your operations, your sector of activity, your main customers and suppliers, your growth plans, your competitive advantages, and your analyses of the competition and main potential threats. All of this information will allow the advisor to analyze and properly determine the value of the business.
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Create marketing materials
Based on the discussions and information provided by the seller, the business transfer specialist will prepare the appropriate documentation to initiate a structured sales process. It will include the following, in order of disclosure to prospective buyers:
– An anonymous executive summary (commonly referred to as a teaser) outlining the business.
– A Confidential Information Memorandum (CIM), which provides potential buyers who have signed a confidentiality agreement with the information necessary to determine whether the proposed transaction is of interest.
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Identify and approach potential buyers
For the sale of a business to be successful, it depends heavily on the choice of the right buyer. It is, therefore, necessary to look for them in the right places. In collaboration with the owner, the business transfer specialist will prepare a list of potential buyers based on certain predefined criteria and approach them formally and confidentially.
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Draft confidentiality agreement and CIM presentation
Interested buyers will be asked to sign a confidentiality agreement. Upon signing, they will receive the CIM.
The content of the CIM will generally be sufficient for a buyer to express an interest in the business with a fairly clear idea of the value to be attributed to it. The business transfer specialist will act as an intermediary between the potential buyers and the seller. They will answer questions and can provide additional information if necessary.
When faced with several interested buyers, the seller must sort through the preliminary offers. These indicate the buyers’ expectations in terms of price and timing, as well as other critical information for the seller.
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Set up the required meetings
The previous step results in a shortlist of buyers who have proposed a preliminary offer deemed interesting enough for the seller. Only these shortlisted buyers will be invited to meet the business owner. In addition to exchanging information relevant to the interested buyer, these meetings are also intended to determine the complicity between the buyer and the seller—a factor that is too often underestimated.
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Review the letters of intent (LOI) and select the buyer
In collaboration with the seller, the business transfer specialist will analyze the letters of intent obtained to identify the best possible offer. The specialist has the expertise to help the seller negotiate the final clauses of the selected LOI to his advantage while respecting the realities of the market, including the structure of the purchase price, representations, and warranties (including terms, contingent consideration, balance of sale, amounts under escrow) and deadlines to be met.
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Conduct due diligence
Following the signing of the letter of intent, the buyer’s due diligence process will be initiated. The owner will provide access to all financial, legal, operational, environmental, and tax information requested by the buyer in its due diligence list. The business transfer specialist will coordinate this process between both parties. A secure virtual vault will be used to facilitate the exchange of documents.
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Negotiate and close
The previous step will lead to the final transaction negotiations and the purchase agreement as well as the preparation of the closing agenda and schedule.
Contact one of our specialists at EC2 to discuss your business transfer project today
