Ready to exit your thriving business? Whether it’s now or part of your long-term plan, this guide explores the typical 5-6 month process of working with an investment banker to sell your business.
Investment bankers guide you through the process to maximize your return and minimize headaches. We’ll break down the key stages, from valuation to closing, ensuring a smooth and successful transaction.
Preparation (Weeks 1-5):
- Due Diligence & Valuation: The investment banker meticulously examines your company’s operations, financial health and strategic plan, uncovering hidden gems and potential challenges. This analysis forms the basis for positioning the company for the best outcome and maximum valuation.
- Create Introductory Letter (also called a Teaser): The investment banker will craft your story into a one-page document to pique the interest of potential buyers. This concise document highlights your company’s strengths and achievements, without revealing confidential details.
- Create Confidential Information Memorandum (CIM): The investment banker will craft a detailed approximately 30-50 page document outlining your business’ history, financials, growth potential, and competitive landscape.
- Complete Buyer List: The investment banker will develop a prospective buyer list, targeting highly qualified companies strategically aligned with your goals. The business owner provides go/no-go feedback on the list and final edits are made.
Market Outreach (Weeks 6-11):
- Send Teasers and Confidentiality Agreements (CAs): The key decision makers of prospective buyers are confidentially contacted. The Teaser and CAs are distributed to all parties. The investment banker will follow up regularly to ensure buyers are reviewing the opportunity.
- Release CIM: Once the CA’s are in place, the CIM is sent to buyers who sign the CA. The investment banker will field questions from buyers as they make their decision to proceed in the process.
- Collect Indications of Interest (IOIs): Once buyers have reviewed the CIM, they may submit an IOI, a non-binding document expressing their initial level of interest in the company and their range of value.
Negotiations (Weeks 12-15):
- Select Buyers to Continue in the Process: Based on the results of the IOIs, the owner and investment banker will shortlist interested buyers to proceed with management presentations and facility tours. These meetings allow the buyers a chance to hear about the business first-hand from the owner and management team. As importantly, it gives the you the chance to vet the various buyers and help determine which will be the best next owner of the business.
- Receive Letters of Intent (LOIs): Buyers who are interested in making an offer on the business will submit a LOI outlining the key terms of the deal, such as price, deal structure, contingencies and closing timeline. The owner will work with the investment banker to negotiate the LOIs to determine which buyer will be best for the future of the business.
Documentation (Weeks 16-22):
- Buyer Conducts Due Diligence: The buyer will examine your company’s finances, legal standing, and operational details. The investment banker ensures a smooth exchange of information using a secure virtual repository for company information.
- Create Legal Documents: The Purchase Agreement outlining the final deal terms is drafted and negotiated.
- Complete Purchase Agreement: The culmination of this phase is the finalization and signing of the Purchase Agreement by the seller and buyer.
Closing (Weeks 23-24):
- Closing Logistics and Transition: The investment banker coordinates the closing timeline and plans for a smooth handover to the buyer.
- Wire Transfer of Funds: The closing takes place, with the transfer of funds to your chosen financial institution.
Remember, this guide is a starting point. It’s wise to consult with qualified professionals like investment bankers and other trusted advisors including your wealth manager, lawyer and accountant to tailor a sale process to your specific goals. With careful planning and the right team by your side, you can achieve a successful sale and watch your business flourish in its next chapter.
The Takeaway
Selling your business or considering a future sale? An investment banker can streamline the 5-6 month sale process, minimizing the risk of a botched deal and maximizing your return. They’ll handle aspects of the process including valuation, buyer targeting, negotiations, and even crafting teasers and closing documents. This guide provides a roadmap but consult with investment bankers and other advisors to tailor the sale to your specific goals.