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.