It may help to think of your company's sale as a bit like an episode of Dancing With the Stars. Really.
Every week thousands of fans tune in to Dancing with the Stars to watch their favorite celebrities learn, perform new dances, and compete against one another. Every star is partnered with an experienced professional dancer who teaches them the dance steps and moves, and guides them through the complex dance routines. The stars truly depend upon the pros and realize that one misstep could lead to being eliminated from the competition.
Selling a middle market business is a complex and demanding dance. Every business owner needs a pro to explain the steps and guide them through the process. While it may look simple, one misstep could easily cost a business owner millions of dollars or scuttle the deal altogether.
More precisely, selling a business involves three distinct phases and 20 unique steps. I like to refer to this as the M&A 3-20 tango. Like dancing, it may look simple, but you need assistance from a pro to maximize the value of your company, close the deal and end up a winner. Here is a quick overview of the M&A 3-20.
Most dances have three phases: a beginning, middle and end. Selling your business also involves three phases, and each phase is irreversibly linked to and reliant upon the previous phase.
Preparation Phase (2 months)
Comprehensive preparation is the foundation for success. The owners must conduct an introspective and honest internal evaluation of the company, prepare detailed marketing materials for prospective purchasers, and establish a preliminary buyer list. Thorough preparation is the bedrock that will enable the sale to move to a successful closing. •Verification of general company information •Review the company’s industry conditions•Review the company’s business strategy •Review the company’s M&A strategy •Complete the company’s M&A planning •Implement the company’s business optimization •Complete financial analysis, preliminary documentation and marketing materials
Marketing and Negotiation Phase (2.5 months)
Professional marketing of the company, as well as persuasive negotiation, come next. Careful marketing and negotiations will employ all the plans developed in the preparation phase. The company should use an experienced investment banker to contact designated buyers and conduct a silent auction. Detailed preparation plans are futile if the marketing and negotiations with buyers are second-rate.
•Implement buyer/investor search and identification•Initiate contact with qualified target acquirers on buyer list
•Create and manage a silent auction to maximize the company’s value
•Coordinate comprehensive due diligence of the company’s business
•Negotiate and refine proposed deal structure
•Determine optimum financing structure and identify potential lenders
•Perform a comprehensive regulatory review
•Obtain required transaction approvals and consents
•Negotiate the final purchase and sale or merger agreement
Closing Phase (5 months)
Efficient deal closing is the result of professional, win-win marketing and negotiations. The closing phase requires intricate mergers and acquisitions technical expertise, as well as a strong dose of psychological analysis, to persuade the buyer to sign a definitive purchase agreement.
•Manage deal closing
•Manage post-closing activities
•Facilitate integration to capitalize on synergies between buyer and seller
•Conduct post-closing meeting with client to ensure objectives were met
Remember: This is a long dance that requires 9 to 12 months to complete. You’ll need an experienced dance partner to keep you focused and avoid costly missteps!
Selling your business is not simple. It is complex and time consuming, and requires a thorough understanding of all phases and steps in the sales process. Like a gracefully performed dance routine, if a professional is leading the way, the process will flow smoothly and conclude to thunderous applause when the deal closes. Before you sell your business, be sure your M&A pro knows the M&A 3-20 Tango.
STEVEN M. SARWIN has more than 15 years of experience in the financial services sector, including bulge bracket and middle-market investment banking experience. He’s been involved in corporate development and strategy, mergers and acquisitions advisory, and security derivatives sales. He has facilitated or executed 24 mergers and acquisition transactions totaling $1.7 billion in enterprise value. @@middlemktMandA