How Your Business Gets Sold

You decide you want to sell your business. You’re tired of working and want to ride off into the sunset with your pickleball instructor.

So, what’s next?

Your first thought might be to hire someone to help you out with that. Great idea – find a professional who can handle it for you. Someone who can help you navigate the selling process by finding buyers, managing buyer discussions, negotiating the sale and delivering an offer.

In other words, a real estate agent but for your business.

Mergers & Acquisition (M&A) advisors, like real estate agents, provide peace of mind that your most valuable asset is in experienced hands. They know what buyers to look for, how to position your business, what questions buyers will ask and how to answer them. They handle the sale from start to finish so you can sleep easy.

Here’s what the process looks like:

Deal Preparation

The due diligence period starts immediately after you sign the engagement letter with your M&A advisor. They’ll start by conducting a deep dive to learn as much as possible about your business. They will pore through your financials, your product/service offerings, your customer lists, and much more.

But fair warning, this phase will take some time and effort on your part.

This is the time to get your financials in order, procure important documents and sit down with your advisor and get grilled about your company. Think of this like cleaning up a little before a house showing. It’s most likely going to be difficult to attract buyers with a messy kitchen and dog poop in the front yard.

Getting everything tidy and organized right as the process is getting started is a great way to find great buyers and ensure the sale runs smoothly.

Finding Buyers

Now it’s time for your M&A advisor to get to work on their own. By now, the Executive Summary (a single-page overview of your business) and a list of potential buyers have been developed by your advisor. This Executive Summary is then sent to everyone on that list. Those who reply with interest in buying your company will be sent the Confidential Information Memorandum (CIM) a.k.a. the Executive Summary on steroids. This is a PowerPoint presentation that discloses your business in much greater detail and is normally only sent to buyers who agree to sign an NDA.

Your advisor will likely be very busy during this time taking calls and answering questions for potential buyers.

Think of this as the house showing stage – buyers are taking a closer look and deciding if this is right for them. They’re walking through the house and trying to see if this is really the place they want to live for the next 30 years.

If the answer is yes, they’ll submit an offer.

Indications of Interest and Management Presentations

After buyers have had a chance to review the CIM and get their questions answered, the remaining parties will submit an Indication of Interest (IOI). This details how much they think the company is worth (or really what they are willing to pay) as well as a proposed sale structure.

From there, with the help of your advisor, you will decide which IOIs to move forward with. By now you and your advisor have already discussed what you think the business is worth / what you’re willing to sell for.

Feel like a couple of buyers are lowballing you? Tell them to scram. You know what you’ve got.

Once that’s taken care of, it’s time for management presentations. The buyers who submitted the best IOIs now have the privilege of meeting with you. They’ll ask you some questions and take a look around your facilities. Don’t worry – your advisor will be there by your side helping you through all this.

But they’re not just interviewing you and your business, you’re also interviewing them. It’s not always about the highest price – structure, diligence conditions and even culture fit should all be considered. Who is the buyer and what’s their vibe? Feel like a buyer is bad news and won’t treat your business like it’s their favorite child? They can scram, too.

LOI and Final Due Diligence

Management presentations are wrapped up. You’ve met the potential suitors, considered the offers and told the buyers to get lost.

Except one. Your favorite of the bunch. Congrats, you found your buyer!

Oh god I think I just jinxed it.

Why?

Because it’s not a done deal yet. Even though the buyer has signed a Letter of Intent (LOI), it doesn’t mean the sale is final. They’re intending to buy your business, they just need to check on a few things first.

This is where the buyer really gets under the hood. Before they commit any capital, they’ll want to make sure everything they’ve been told by you and your advisor is true and the business is structurally sound. This involves 30-90 days of deep due diligence on your financials, operations, customers, legal structure, etc.

Think of this as the home inspection phase (if you haven’t fixed the roof in 30 years or evicted the family of raccoons from the crawl space by now, then I don’t know what to tell you).

Your advisor will be able to handle most of the due diligence requests during this time thanks to the work done during the deal preparation period.

Done Deal

Now let’s say I didn’t jinx it, everything goes smoothly and the sale goes through. Congrats – you’re done!  You sold your business for real.

These processes can take anywhere from 6-18+ months and require a ton of work. Just deal preparation alone can take considerable time and effort. But then buyers lists and marketing materials need to be developed, buyers have to be notified and then comes a non-stop stream of meetings and due diligence requests. And the cherry on top is that, at the end of the day, you’ve still got a damn business to run!

So, aren’t you glad you hired an M&A advisor to help you out with all that?