How the M&A Process Works
The typical duration of selling your business is 6 to 8 months however many factors influence that timeline such as the complexity of the business and the specifics of the sale. This process typically involves several stages, each requiring careful attention. Below, we outline the essential steps involved in the M&A process, providing a clear roadmap for what to expect. The significant complexity involved makes the role of your Advisor and their team indispensable in navigating the journey towards a successful sale.
Phase 1
PREPARATION
After an NDA is signed with your M&A Advisor, key financials will need to be sent over to your Advisor and ideally include: 3 years of P&L, 3 years of Balance sheet and a recent TTM (Trailing 12 months P&L). This will provide a first assessment opportunity for a valuation estimate.
Phase 2
AGREEMENT
After a review and additional discussion, the seller will then sign a LOA (Letter of Agreement) with the advisor. This agreement commits the seller to representation by the M&A firm. The LOA will include details of the representation along with specifics on the retainer fee along and the deal transaction fee. Read about the benefits of using an M&A firm to sell your business.
Phase 3
MARKETING
The Marketing process is key to the success of a business sale and includes multiple steps.
- Client Interview: The advisor will conduct an interview with the sellers to obtain insights about the company along with key financial information. From there two marketing documents are created.
- The first document, called a “Teaser” is a one-page document outlining key points about the business and topline financials. A confidential project name is used and the Teaser is emailed to our network of over 6,000 PE firms, strategic acquirers and family offices.
- The second document, a CIM (Confidential Information Memorandum) is the primary document to educate potential buyers on a business. It is typically 8-10 pages and contains much greater detail about the client’s business including the name of the business, the history, structure, key personnel, industry data and a more in-depth look at financials. Interested parties generated via the Teaser will sign an NDA and the CIM will be released to them for review.
- From the release of the CIM, the Advisor will conduct conference calls with potential buyers throughout a window of 2-4 weeks. During that process, the most interested buyers will typically request a discussion/visit with the seller(s) included.
Phase 4
LOI SUBMISSION
Throughout the marketing phase, buyers will begin submitting LOI’s (Letter of Intent) to the Advisor. The Advisor and the buyer will review terms of the LOI and narrow down to a selected Buyer. Additional negotiation typically comes into play during this phase. Once satisfied, the buyer and seller sign the agreement.
Phase 5
DUE DILIGENCE
Once an LOI is signed, the due diligence process will begin. This step includes both Quality of Earnings review (Q of E) as well as Legal due diligence. The Advisor, working with their internal team, will manage this process with the client and their supporting team. This is typically a lengthy and detailed process with the buyer and involves reviewing multiple financial statements, contracts, legal documents, IT, insurance, benefits, tax, and environmental diligence (if necessary). Learn more about navigating the due diligence process.
Phase 6
CLOSING
Upon final agreement to the terms of the sale, the final step is to close the transaction. The advisor will manage the process of the signing of a purchase agreement, transferring ownership of the company, and completing any necessary legal or regulatory filings.
Phase 7
POST-TRANSACTION SUPPORT
Although supported by your Advisor, the post-transaction process is typically developed and conducted by the buyer. Your Advisor will continue to be there to consult and provide assistance to insure a smooth transition.
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