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.

M&A – Criteria and timeline

Selling a business – Part I:

The time­li­ne sel­ling a busi­ness and the cri­te­ria to achie­ve best results influ­ence your decisi­on to sell your com­pa­ny or parts of it.

Sel­ling your com­pa­ny is often an emo­tio­nal­ly char­ged once in a life­time decisi­on. You will bene­fit from having a pro­fes­sio­nal along­si­de you that mana­ges the pro­cess and does the work lea­ving emo­ti­ons asi­de.

The pro­cess inclu­des a few important steps, which should be fol­lo­wed to opti­mi­se chan­ces for a suc­cess­ful tran­sac­tion, mee­ting objec­tives such as to:

  • Maxi­mi­ze value for the sel­ler
  • Meet stra­te­gic restric­tions
  • Main­tain busi­ness value
  • Keep pro­cess under con­trol
  • Do not over­bur­den manage­ment
  • Do not dis­rupt ope­ra­ti­ons
  • Main­tain employ­ment
  • Retain key per­sons

Pro­fes­sio­nal sup­port helps defi­ning rea­listic terms and adds necessa­ry resour­ces to your manage­ment, accoun­t­ants, tax pro­fes­sio­nals and lawy­ers to mas­ter the pro­cess. Such sup­port is typi­cal­ly pro­vi­ded by invest­ment banks, M&A advi­sers and busi­ness bro­kers. They can help you pre­pa­ring the com­pa­ny for sale, under­stan­ding the effec­tive value of the busi­ness or its assets, high­light the most valu­able aspec­ts, access buy­ers, gene­ra­te par­al­lel com­pe­ti­ti­on, fle­xi­b­ly design an ade­qua­te tran­sac­tion struc­tu­re and mini­mi­ze ope­ra­ti­ve dis­rup­ti­ons and delays anti­ci­pa­ting due dili­gence and valua­ti­on issu­es. Brin­ging resour­ces, rigor and pro­fes­sio­nal exper­ti­se to the pro­cess doesn’t come free, and, as usu­al, you will get what you pay for. The final sale result depends on how the who­le pro­cess is mana­ged.

Once you man­da­te an M&A advi­ser, you will gene­ral­ly have a few inten­si­ve mon­ths befo­re exe­cu­ting the tran­sac­tion.

Timeline selling a business:
  1. Pre­pa­ring the busi­ness for sale – can be very swift, if the busi­ness is trans­par­ent­ly struc­tu­red and docu­men­ted or take qui­te long if it isn’t.
  2. Mar­ke­ting the busi­ness – might take a few weeks, depen­ding also on the stra­te­gy and the avai­la­bi­li­ty of buy­ers.
  3. Selec­ting indi­ca­ti­ons of inte­rest and fol­lo­wing up with data and mee­tings – might take some weeks, depen­ding from the qua­li­ty of infor­ma­ti­on and avai­la­bi­li­ty of buy­ers.
  4. Gene­ra­ting com­pe­ti­ti­on through such as a struc­tu­red auc­tion to recei­ve bin­ding bids and draf­ting the tran­sac­tion struc­tu­re – can be very swift, once buy­ers have been satis­fac­to­ri­ly infor­med.
  5. Mas­te­ring due dili­gence, final nego­tia­ti­on and clo­sing – might take weeks to mon­ths, depen­ding from its com­ple­xi­ty and data qua­li­ty.

Delays to the expec­ted time­li­ne sel­ling a busi­ness are rela­ti­ve to the cho­sen set­up, if days beco­me weeks, weeks can beco­me mon­ths. Hic­cups lurk at each step, espe­ci­al­ly if the initi­al pre­pa­ra­ti­on is not accu­ra­te. We will have a look at them sepa­r­ate­ly. Of cour­se, some short­cuts can make sen­se in cer­tain cases, but the princi­ples should app­ly to most cases, inclu­ding to the sel­ling of major pro­per­ties.

Arranger helps you to => get Attention => create Attraction => pass Analysis => execute Agreements

More thoughts about how to sell a com­pa­ny will fol­low. 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?