All of our Mergers & Acquisition (M&A) clients ask, “What does the sales process look like? What are the actual steps?”
The M&A process generally involves the same basic steps, which have similarities from one investment bank to another. TOBIN differentiates itself through its higher level of personalized service in the M&A process for both the seller (client) and the buyers. Our approach has won us accolades and referral business in the marketplace. TOBIN eschews “data rooms” and robot mailings; instead we prioritize developing and nurturing relationships along the way.
1.) Determination of the Owner’s Objectives: First, TOBIN helps our client figure out why they want to sell their business. We help our clients to determine the personal and professional objectives that they hope to realize in the process. The client’s objectives may include a selling price, employee retention, ability to continue in an executive or CEO role, or a desire to retire from the business altogether. We relish this part of the process, helping our clients to sort out what it is that they truly want. TOBIN works with our clients to determine if the objectives are realistic and achievable relative to the current market. We then strategize with the client about the specific types of buyers that will help the client meet their objectives for their company and their estate plan. The owner’s objectives may dictate the particular types of buyers (strategic buyers, financial buyers, or even hybrid buyers) that should be targeted.
2.) Due Diligence, Valuation and Marketing Development: After determining the owner’s objectives, TOBIN jumps headlong into the due diligence process. In due diligence, we gather information and analyze the company in detail. We collect and review historical, current and projected financial statements, we dive deep into the client’s service and product offerings and we untangle and interpret the client’s operational structure. We strive to understand and shape, for the benefit of prospective buyers, the client’s strengths and weaknesses, its specific and nuanced market position, and all other aspects of the company in its industry. Using this information as well as researching recent similar sales transactions in the owner’s industry, TOBIN determines a valuation range for the selling company – the price that should be achieved from the sale of the company.
3.) Marketing Materials Development: During the information gathering and due diligence phase, TOBIN works to create meaningful marketing documents for the sale process. We develop the Public Executive Summary, or “Teaser,” which is used to pitch the client to the marketplace on a no-names basis. TOBIN also creates the “Confidential Information Memorandum” (CIM) describing all aspects of the company needed for evaluation by potential buyers once they have signed a Confidentiality Agreement. TOBIN, through this process, becomes extremely knowledgeable about the company and its industry, which enhances the process for potential buyers. TOBIN works closely with the client to develop the best “pitch” to maximize proceeds from the sales process.
4.) Market Evaluation and Buyer Search: TOBIN, during the two stages discussed above, also develops the Buyers List. We identify the best acquirors through a multi-pronged process, relying on our internal, curated buyer databases as well as those that we subscribe to. We create the Buyers List in an easily sharable and ingestible format, so that it can be readily accessed by the client at any time. The Buyers List is shared with the client during its development and is approved by the client before any potential buyers are contacted.
5.) Going to Market: Once potential buyers are researched, identified and agreed upon, TOBIN goes to market, making the initial contact with each prospective buyer and sharing the acquisition opportunity with them. In this initial contact, we provide the prospective buyers with the Public Executive Summary, which helps them quickly and efficiently review the company and determine if they would like to take the next steps. TOBIN exercises great control to keep the identity of the seller confidential during this stage of the process. If the prospective buyer decides to learn more, TOBIN negotiates a confidentiality agreement with the potential buyer and then provides them with the CIM once their confidentiality terms are secured.
6.) Management Presentations and Ushering Buyers through their Initial Due Diligence: Once buyers start lining up and receiving the extensive confidential information provided in the CIM, they will request information that supports the information provided in the CIM. TOBIN provides this information to the prospective buyers in a personal and high-touch manner, building a deeper relationship along the way. TOBIN continues to develop the story of the opportunity to meet the interests of each buyer. The buyers will also want to meet management, which happens in a virtual Management Presentation between the seller and each prospective buyer.
7.) Negotiations with Many, Letter of Intent with One: TOBIN continues to satisfy the information requests of each buyer and solicits indications of interest from each of them. As Indications of Interest are gathered TOBIN presents those to the seller and negotiates the offers. TOBIN collects data points such as the price offered, the structure of the offer and other related terms and conditions of the offer. The firm and the client then select, after further negotiation, the potential buyer and requests their written Letter of Intent (LOI). This is when the client engages its legal counsel to assist in the formulation and negotiation of crucial points in the LOI. All parties help review and negotiate the LOI to ensure that current market factors and potential tripping points are incorporated, and overcome, as a precursor to the Purchase Agreement, which comes next.
8.) Buyer’s Closing Due Diligence: Following the execution of the Letter of Intent, the buyer finalizes its due diligence, confirming all of the facts that it learned in the initial process and checking all of the other boxes that are required by regulators, auditors and internal vetting processes. Because of heightened awareness in due diligence over the past several years, this period has expanded from 45-90 days to 90-120 days. The buyer will request many documents and will explore and understand the controls and procedures that allow the seller to operate the company, as the buyer prepares to transfer the ownership of the company to itself.
9.) Drafting and Negotiating the Closing Documents: While the buyer conducts the final due diligence, the attorneys for the buyer and seller negotiate and draft a definitive purchase agreement that will ultimately bind the parties to a purchase contract.
10.) Closing: Closing occurs shortly after the completion of the buyer’s closing due diligence and the drafting of the closing documents. This is when all of the parties gather around DocuSign – no longer a conference table! – and digitally sign the documents and move sale proceeds to the appropriate accounts. It’s a day to celebrate the collective efforts.
We have spent years building a strong reputation, dedicated to maximizing your value. Being responsive, thorough and efficient are the foundational pillars of TOBIN and have allowed our clients to experience the financial results of successful sale.
TOBIN would like to help you make your sale successful. Please call us if you have questions about our services. We’ll answer your questions and give you our assessment of how we might help your transactions run more smoothly.