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.

Preparing for sale

Selling a business – Part II:

Let’s pre­pare for sale. In M&A cri­ter­ia and timeline we didn’t go into details. And now we won’t tell you here to increase the value of your busi­ness before selling it, as we assume that you have been doing it up to now as well as you could and planned the exit. If how­ever, the struc­ture is not adequate to prop­erly func­tion without the own­er or presents oth­er issues, we should go back one step and do the pre­lim­in­ary home­work. If some­body else just might do it bet­ter, it opens a chance and con­firms the right time to sell.

At this point one has just to make sure that the value is recog­nized and quan­ti­fi­able by the buy­er at least as well as it is for you, also con­sid­er­ing the past evol­u­tion. What is clear for you might often not be so for a pro­spect buy­er.

Prepare for sale

To assure the neces­sary trans­par­ency, and to under­stand the value per­ceived by poten­tial buy­ers, we shall start gath­er­ing rel­ev­ant inform­a­tion such as:

  • Review­ing busi­ness plans and mar­ket reports, fin­an­cial reports and pro­jec­tions, stra­tegic and fin­an­cial ana­lys­is.
  • Con­fid­en­tial talks with man­age­ment and employ­ees.
  • Elab­or­ate a poten­tial buy­ers list with interest rationale.

This helps to pos­i­tion the busi­ness with­in its mar­ket envir­on­ment, show­ing clearly its com­pet­it­ive advant­ages, strengths and the quant­it­at­ive ele­ments for its valu­ation.

Valu­ation will start from a com­par­is­on of fin­an­cial per­form­ance with com­par­able busi­nesses for which mar­ket prices are avail­able from trad­ing or recent trans­ac­tions which allow to imply mul­tiples of such as EBITDA, rev­en­ues and oth­er rel­ev­ant indic­at­ors. A more accur­ate price val­id­a­tion would include a detailed pro­jec­tion of cash flows as is or with assump­tions such as of changes of use of assets, syn­er­gies with acquirers, or whatever rationale can add value to the trans­ac­tion, con­sid­er­ing chan­ging scen­ari­os, and sens­it­iv­ity ana­lys­is dur­ing the expec­ted time to con­clude the trans­ac­tion. Such num­ber crunch­ing sup­ports nego­ti­ation points and can also the be the basis for an LBO (Lever­aged Buy­out).

A key of the M&A pro­cess is the pre­par­a­tion of a pre­cise and pro­fes­sion­al Con­fid­en­tial Inform­a­tion Memor­andum or Offer­ing Memor­andum which includes all an inter­ested buy­er needs to val­id­ate his invest­ment hypo­thes­is and reach a real­ist­ic valu­ation, not to be con­futed by later detailed due dili­gence. It resembles a thor­ough busi­ness plan with its sum­mary and invest­ment con­sid­er­a­tions, descrip­tion of the com­pany, its struc­ture, mar­ket ana­lys­is, trends, oppor­tun­it­ies, com­pet­i­tion, fin­an­cial inform­a­tion, etc. and out­lines the bid­ding pro­ced­ures.

Con­struc­ted on this con­tent a blind teas­er with a descrip­tion of the main char­ac­ter­ist­ics of the com­pany, the reas­on for the trans­ac­tion, the main fin­an­cial inform­a­tion from the last and the pro­jec­tions for the next years will attract the investor to the advant­ages of the offer.

Who wants to buy shall come and see!” is the oppos­ite approach, which sel­dom works out well. Why should poten­tial buy­ers put con­sid­er­able effort in study­ing and ima­gin­ing the vir­tues of an unknown tar­get? You bet­ter take your time and some resources to pre­pare for sale to be more suc­cess­ful later. 

Fur­ther pre­par­a­tion is ded­ic­ated to com­plete the pro­spect buy­ers list based on com­ple­ment­ary views based on the com­pany exper­i­ence and the advisers research. Such a list is ana­lysed on pre­sumed interest, stra­tegic fit and poten­tial syn­er­gies, fin­an­cing and abil­ity to execute as well as com­pet­i­tion con­sid­er­a­tions.

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

Alternative lending and services

Alternative financial services compensate banks retreat. What can you do?

  • What altern­at­ives fin­an­cial ser­vices exist to arrange fin­an­cing, grow and pro­tect wealth, invest in or sell a com­pany, or save on oth­er ser­vices?
  • What can you do now to get your business financed?

  • You can make sure that your busi­ness is among those investors and lenders judge worth­while. And you can approach altern­at­ive sources.
  • You can do more your­self or hire some­body to do it for you. Doing it your­self is what large cor­por­a­tions and fam­ily offices gen­er­ally do and keeps you in full con­trol.
  • Present your case the best way. If your case is fit­ting in lenders wishes, your good CFO and treas­ury might get bet­ter terms than in the past.
  • How­ever, if you do not need such cap­ab­il­it­ies on a recur­rent basis, you might not haven such full-time func­tions in-house, but you can talk to us.
  • How can you have your assets and liabilities correctly managed?

  • Pay an adviser for the ser­vices you were used to receive from the bank. It might save you money and provide you a not con­flic­ted res­ult. You prob­ably have been pay­ing for bank advice any­way through expens­ive products, cus­tody fees, exchange rates, etc. We are con­fid­ent that we will find poten­tial with altern­at­ive fin­an­cial ser­vices.
  • Plan for the longer term than the time hori­zon of banks salespeople. Think about and your suc­ces­sion, wealth pre­ser­va­tion with­in the fam­ily, invest­ments or sale of the com­pany or spe­cif­ic major assets and prop­er­ties. Such events should be pre­pared for long ahead.
  • How can you take advantage of rising opportunities

  • Crowd­fund­ing, peer-to peer lend­ing, tra­di­tion­al and altern­at­ive debt pro­viders, pay­ment ser­vices, brokers and all kind of Fintech plat­forms are grow­ing altern­at­ive fin­an­cial ser­vices.
  • How­ever, if you are not only buy­ing ser­vices but ask­ing for money, make your­self and your case attract­ive for the coun­ter­part, make your fin­an­cials under­stand­able and watch your rat­ing.
  • You can eas­ily save money on smal­ler oppor­tun­it­ies such as for­eign exchange or stock brok­ing. As an example: a dif­fer­ence between bid and ask of bank cur­rency exchange rates 1-7%, depend­ing from amounts and cur­rency pairs, means 0.5 – 3.5% mar­gin on inter-bank rates. You, or we for sure can def­in­itely get bet­ter than that.
  • Mer­gers and Acquis­i­tion are becom­ing more dynam­ic also in the lower seg­ment. Rise and con­sol­id­a­tion of plat­forms allow an ever faster and broad­er reach to Investors. Talk to us if you want to get ready for such trans­ac­tions.

Less lending and service from Banks?

Less lending and service from banks?

Banks reduce SMEs lending services. What is happening?

  • Lend­ing to non-fin­an­cial cor­por­a­tions in Europe is declin­ing since years while much funds are idle and cent­ral banks’ interests low. Banks reduce SMEs lend­ing ser­vices espe­cially in the stressed Euro peri­phery with con­sequences.