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Typical Company Sale Transaction

Most company sales proceed along the  lines illustrated by the following chart:

Company Sale Process Map Feb2014 2160x1620Strategic Company Sales guide our clients through each aspect of the Transaction Process, ensuring that key advisers and other specialists are included at all relevant stages, and all personnel collaborate effectively.  This will help keep delays, uncertainties and costs minimised.

We operate a proven project management methodology for scheduling critical activities.  This helps ensure that there are no delays or uncertainty at stages such as Due Diligence.  The 14 step process includes:

1 Justify need for, and goals of divestment / sale

1.1 Should owner be exiting – reasons

1.1.1 Early exit to maximise value

1.2 Alternative methods of exiting.

1.2.1 Contemplate other methods of sale if necessary

-Gradual Liquidation (ASSOB / IP / Private Equity)

-Management Buy-out (MBO), Management Buy-in (MBI) and Buy-in Management Buy-out (BIMBO)

-Family Succession

-Partner or other stakeholder buyout

-Partial Exit

-Divisional Sell Off

1.3 Timescale for exit.

1.4 Ensure business and personal financial & non financial goals aligned

2 Restructure, Groom & De-Risk to Value Maximise

2.1 Making your company attractive to sell

2.1.1 Short term Value enhancement – Closing sales, expense control, inventory control, appearance of premises / website, tightening stakeholder contracts, improving systems & technologies.

2.1.2 Eight Sellability Factors

2.1.3 Have a Growth Plan / Business Plan

2.2 Make your Company Easy to Buy

2.2.1 Legal, Financial, Coach, Valuation

2.2.1.1 Preparatory financial work

2.2.1.2 Preparatory legal work

2.2.1.3 Preparatory personal finance work

2.2.2 Pre Sales Checklist

3 Shortlist potential buyers

3.1 20 Step Grid

3.2 Sellability exercise

3.3 Key attractions of the firm and the buyer’s opportunities

4 Appoint teams for sale & continuity of business

4.1 Appoint Team

4.1.1 M&A Specialist

4.2 Get a Valuation

4.2.1 Factors Affecting Valuation

4.3 Involvement of Internal Personnel

4.4 Existing operations / personnel are loss of top level focus.

4.5 Insurance Specialist

5 Develop Listing Strategy

5.1 Acceptable sale price, appropriate timescale, appropriate buy, current owners preferred contractual relationship with new owner post sale, appropriate marketing strategy, appropriate confidentiality or notification of stakeholders, preferred buyer, strategy for maintaining key employees, approaches to competitors.

5.2 Ensure “buy in ” from other shareholders if any

5.3 Draft documentation e.g. Information Memorandum, based on target buyer and listing strategy

5.4 Prepare Deed of confidentiality / non disclosure

6 Marketing / Solicit Interest

6.1 Approach most likely buyers

6.2 Develop strategy for approaching competitors

6.3 Produce materials required to promote to buyers e.g. revamped existing customer website, secure “buyers only” website etc.

6.4 Contemplate other indirect approaches if necessary e.g. targeted press, online or international media advertising.

6.5 Sellability – FAQ Writer.  consider common questions asked about your business.

7 Initial meetings

7.1 Brief IM / Teaser.  Provide one page overview concealing the name of the company and any specifics that would assist the target to recognise the company.

7.2 Undertake preliminary Due Diligence on buyers – their potential interest, access to finance etc.

7.3 Focus on establishing and relationship and rapport with buyers.

7.4 Provide reporting tools e.g. secure online website to advise Owner of current state of sales process.

7.5 Questions for Buyer

8 Qualify Prospect & Provide Documentation (under confidentiality)

8.1 Confidentiality Agreement

8.1.1 Development a non disclosure agreement

8.2 Information Memorandum

8.2.1 Detailed information on the historical background, current situation and future opportunities for the company.

9 Follow Up Buyer Meetings

9.1 Derived deeper understanding of buyer perspectives:  how they see they can add value to your company. how the acquisition can add value to their own operations. Understanding how they view the return on investment.

9.2 Create competitive tension

9.3 Prepare target buyer presentations and practise Q&A’s

10 Offer Evaluation & Agree sell decision with other internal stakeholders

10.1 Historic through financial statements

10.2 “Off Balance Sheet Historicals”

10.3 Future potential and threats

10.3.1 Realisation of synergies

10.3.2 Potential

10.3.3 Capacity for integration

10.4 Valuation through alternate methods

10.5 Board / Committee Presentations

10.6 Possible communication with key staff, suppliers, customers etc.

11 Design & Acceptance of Sale Terms & Structure

11.1 Assist drafting heads of agreement

11.2 Terms & Structure of agreement: Shares v Asset, Vendor Finance, Instalment or Staged Payment, Milestone Conditional Payments, Employee Retention, Retention of exiting owner, exiting owners restraint on trade.

11.3 Contract issues

12 Investigation: Mutual Due Diligence

12.1 Preparation

12.1.1 Co-ordination of documentation – Contracts, financials, Sales Records, Asset and Inventory records, Business Processes, Customer Databases, IP, Property or Lease

12.2 Process

12.2.1 Becoming acquainted with buyers legal and financial advisors.

12.2.2 Establishment and management of electronic Due Diligence – e.g. Ansarada – if required.

12.2.3 Review of legal, financial and operational documentation provided by seller to ensure

13 Acceptance of Agreements & Settlement

13.1 Management & communications between financial and legal advisors for both buyer and seller.

13.2 Other Financial / Legal Agreements

13.2.1 Items included / excluded in sale -Trading stock, plant & equipment, fixtures, licenses and permits.

13.3 Checklists

14 Smooth and risk free ownership transition and beyond

14.1 Avoiding sellers remorse

14.2 Assist in discussions on the transition of owner and the structure of the company – location, employees, customers, alliances

Throughout the stages, information key to buyers and the marketing process is gathered by Strategic Company Sales and used in the Information Memorandum, Buyer Presentations and Due Diligence.

During this process, some of the key reasons why companies achieve higher valuations and faster sales include:

  •   The capacity to document and illustrate in acquirer presentations, the untapped potential that an acquirer could reasonably be able to exploit.
  • An understanding that potential acquirers can often come from the most unlikely places, and so a thorough market analysis is required to determine the best buyer target list and strategy for approaching potential acquirers.
  • A complete set of documents, including completed and updated contracts with stakeholders that ensure legality is proven and potential risks mitigated.
  • A rapid response rate to buyer enquiries, ensuring that the organisation is seen to be professional and ethical in its approach
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