Most people never sell a business, but there are firms that make it their business to help others buy and sell businesses. Those firms are investment banking companies like Tobin & Company. They can help make the process easier and the outcome advantageous to all parties.
Identify and Assign a Team of Trusted Advisors
An M&A project is best pursued with the support of a strong, knowledgeable team of advisors, especially if you’ve never sold a business before. You’ll need an investment banker to produce a current valuation, establish a reasonable starting-price, source your buyers and negotiate the deal. You’ll also need a CPA, a tax advisor, an M&A attorney, as well as a wealth manager and an estate attorney to identify how best to keep the proceeds of the sale growing and working for you in the transition to your post-transaction life.
A Most Important Preliminary Step: The Business Valuation
This task is best left to the investment banker on your advisory team. Investment banking firms like Tobin & Company deal with business valuations regularly, which means they have mastered the process and understand the landscape of your business marketplace, the stability or volatility of the current market and economy and the best techniques for valuing businesses. There are thousands of factors that go into an accurate business valuation: current customers, liabilities, the financial position of the business, growth potential of the business, gross sales, intellectual property, net income, capital assets, human assets, and more.
Valuing a business is not a task for the biased eyes of an in-house accountant. The only way you’ll get to a fair and precise valuation of your business is through the clear vision of an independent mind.
Another benefit of an expert resource conducting your business valuation is that the process will help you better understand your own business. The valuation process evaluates revenue sources, customer bases, relevant contracts and agreements, and other information that will reveal the detail, efficiency and thoroughness by which the business has been, and is, managed. This helps you as the seller to understand how others will perceive your business.
There is Science, Art and Luck in Finding Potential Buyers
Astute business owners, who have started and grown a business to respectable value, should never stop identifying prospective suitors. It never hurts to have knowledge and information about companies you might one day buy, or that might one day buy you! If you’ve filed such information in the back of your mind over the years, now is the time to discuss these prospective buyers with your investment banker.
There are many ways to find interested buyers, so if you don’t already have someone in mind, your investment banker will identify potential suitors through a number of channels: 1) their established network, which they continuously groom and update; 2) engaging with people in your industry to determine companies looking to grow through acquisition; 3) discussions with private equity funds groups that have ongoing concerns whose value can be boosted through additions to the platform; and 4) reviewing subscription databases of industry players that may be open to purchasing complementary businesses to strengthen their market position or expand their sales and distribution.
Once potential buyers have been identified, it is critical to separate the tire-kickers from those who are sincerely interested and who have the financial resources to close the deal. There are companies, especially within the same industry, that flirt with acquisition targets to gather information or to try to steal-a-deal. Your investment banker can help weed these unscrupulous suitors out early. It is most important to have any suitor sign non-disclosure agreements to keep information confidential. Nothing can reduce the potential value of a business like industry rumors can.
Expectations vs. Negotiations
Nobody gets everything they want, but in the best negotiations each party gets enough of what they want to see the deal through. Think win-win!
A great investment banker can determine what each party wants vs. what they can be happy with. Finding that sweet spot is where investment bankers earn their money. The bottom line is that if anyone walks away, nobody wins.
Closing the Deal
Once a mutual agreement on the terms of the sale is reached, a letter of intent (LOI) is signed by both parties.
It has taken a lot of time and effort to get to this point, so now is no time to slow down. The time between the signing of the LOI and closing of the final transaction can be fragile. As a seller, your goal should be the same as it always has been throughout the life of the business: to increase the value of the business or, at a minimum, retain the value on which the agreement is based. There will be plenty of time to relax and celebrate after the deal is closed.
Our process begins with a thorough analysis of your company, the competitive environment and the market in which it operates. Tobin & Company then identifies potential market opportunities to best realize client objectives.
We develop comprehensive, acclaimed marketing materials, including an Information Memorandum and an Executive Summary, depicting the company’s strengths and investment highlights.
Identification of Qualified Buyers
We resourcefully create a broad list of targeted buyers through our extensive knowledge and our databases of strategic and financial acquirers worldwide.
To execute the final sale, TOBIN works closely with our client to evaluate all viable offers. We represent our client’s best interest from the initiation of negotiations, through due diligence and finally to consummation of a transaction.