Closing the deal

Selling a business, Part IV

After Mar­ke­ting the busi­ness, bin­ding offers terms will be ana­ly­sed on the way to a suc­cess­ful Deal Clo­sing.

If a com­pe­ti­ti­ve bidding/auction pro­cess is main­tai­ned, final bids will fol­low fur­ther due dili­gence and the­re might often be no let­ter of intent. Howe­ver, at a cer­tain point of the pro­cess buy­ers might insist on exclu­si­vi­ty / pre­fer­red bid­der sta­tus for a cer­tain peri­od or cost coverage befo­re enga­ging in inten­si­ve due dili­gence and bila­te­ral­ly agree terms on a detail­ed and nego­tia­ted let­ter of intent LOI / Term Sheet. This is rea­son­ab­le but locks in the sel­ler for a peri­od rela­ted to the time to com­ple­te due dili­gence, which will be much shorter, if a ven­dor or sell-side due dili­gence has been made in advan­ce, redu­cing thus the risk of a hic­cup and increa­sing the chan­ce of main­tai­ning alter­na­ti­ve bid­ders’ inte­rest.

Less uncer­tain­ties and rea­dy con­fir­ma­ti­on about the accu­ra­cy and relia­bi­li­ty of pro­vi­ded infor­ma­ti­on should also posi­tively affect a poten­ti­al buyer’s readi­ness to pay a hig­her pri­ce.

The nego­tia­ti­on pha­se will typi­cal­ly start from the SPA draft pro­vi­ded by the sel­ler and the terms of the final bids or the care­ful­ly agreed LOI. The most con­ve­ni­ent deal struc­tu­re will be addres­sed con­si­de­ring many fac­tors such as law, taxa­ti­on or regu­la­ti­ons: asset deal vs. sha­re deal vs. mer­ger, acqui­si­ti­on vehi­cles, car­ve-outs, etc.

Deal Closing

Terms will address not only the sha­res or assets to be trans­fer­red, but many addi­tio­nal points such as clo­sing con­di­ti­ons, rep­re­sen­ta­ti­ons and war­ran­ties to assu­re such as com­pli­an­ce of data pro­vi­ded during due dili­gence with rea­li­ty or assu­ring that no working capi­tal is diver­ted or pre­ven­ting leaka­ge of other assets befo­re deal clo­sing date (locked box), defec­ts reme­di­es and not least the terms of pay­ment.

Pay­ment terms lead to important con­se­quen­ces after deal clo­sing:

  • Cash – with no strings atta­ched.
  • Debt to be rai­sed – you’ll have to sup­port that step
  • Ven­dor finan­ce
  • Instalments
  • Earn out – you’ll still depend from the fate of the com­pa­ny
  • Exch­an­ging Sha­res – you might have to keep them for some time

Once all terms are agreed and the con­tract signed, clo­sing con­di­ti­ons will have to be ful­fil­led and pay­ments terms might affect you, but your com­pa­ny and its inte­gra­ti­on or rest­ruc­tu­ring is now some­bo­dy else’s busi­ness.

If you would like to sell a com­pa­ny, con­sult us, we’ll be glad to help.

Market the deal

Selling a business – Part III:

We can mar­ket the deal after pre­pa­ring the busi­ness for sale. We shall bring the oppor­tu­ni­ty to the mar­ket main­tai­ning con­trol of the pro­cess and the dis­tri­bu­ti­on of infor­ma­ti­on, while moti­vat­ing bid­ders along par­al­lel paths on a level play­ing field in case of a broad or restric­ted auc­tion, or even limi­t­ing it to an indi­vi­du­al pro­cess, accord­ing to your requi­re­ments.

Even if fle­xi­bi­li­ty and readi­ness to amend pro­cess and papers is necessa­ry, a disci­pli­ned approach requi­res best pos­si­ble pre­pa­ra­ti­on and exclu­si­ve rep­re­sen­ta­ti­on. Any com­pro­mi­se on such initi­al decisi­ons is a tra­de-off pos­si­b­ly affec­ting the out­co­me for the sel­ler.

The normal procedure to market the deal is to:
  • Con­tact buy­ers with a redu­ced but strong no-name sum­ma­ry focu­sed on stra­te­gic and quan­ti­ta­ti­ve key ele­ments. Spe­cia­li­zed data banks are gai­ning impor­t­an­ce to expand reach and com­pe­ti­ti­on bey­ond the spe­ci­fic rese­ar­ched buy­ers list.
  • Agree con­fi­den­tia­li­ty (also refer­red as NDA, CU, NCND).
  • Deli­ver the detail­ed Offe­ring Memo­ran­dum (also IM, CIM)
  • Fol­low up, com­ple­te infor­ma­ti­on, arran­ge inter­ac­tion with manage­ment. The bet­ter the Offe­ring Memo­ran­dum, the les­ser the manage­ment dis­trac­tions, delays and dif­fe­rence in pro­s­pect buy­ers’ tre­at­ment. At this point the­re might still be many par­ties inte­rested in recei­ving infor­ma­ti­on.
  • Recei­ve non-bin­ding indi­ca­ti­ons of inte­rest. The­se uni­la­te­ral indi­ca­ti­ons which are some­ti­mes refer­red as let­ters of intent (LOI) too, shall con­tain infor­ma­ti­on about the real inte­rest, fit and abi­li­ty to exe­cu­te the tran­sac­tion.

In the mean­ti­me, inputs from buy­ers’ inqui­ries and from indi­ca­ti­ons of inte­rest help com­ple­te the Data Room extent and pre­pa­ring manage­ment pre­sen­ta­ti­ons.

At this point, stron­gly inte­rested par­ties on the short list will be gran­ted access to the Data Room, pro­ceed to face-to-face mee­tings, manage­ment pre­sen­ta­ti­ons, or some­ti­mes even site visits and be invi­ted to sub­mit final bids pos­si­b­ly based on a draft tran­sac­tion struc­tu­re or even a draft sale agree­ment, or a sha­re purcha­se agree­ment (SPA).

Brin­ging to the mar­ket the deal, have assu­med a bid­ding / auc­tion pro­cess while also easier and more con­fi­den­ti­al but less maxi­mi­sing bila­te­ral pro­ces­ses with sin­gle coun­ter­par­ties are com­mon too.

More details about how to sell a com­pa­ny are approa­ched in the next post. If you have ques­ti­ons, con­sult us, we’ll be glad to help.