A selling transaction for a company typically follows a process similar to that of a private auction.
Selling a business normally considers the following stages:
a) Defining the exit strategy; b) Determining the value of the company; c) Preparing the information; d) Promoting the transaction; e) Negotiating and carrying out the due diligence and f) Closing of the transaction.
Defining the exit strategy
In this stage the specialized consultants hired perform an analysis of the company and its in-depth environment and define, together with the shareholders or the team of the company involved in the transaction, the most suitable form of sale: sale of shares, assets, Goodwill, trademarks, etc. Also, it is identified in a very preliminary way in this stage, who could be potential buyers and the type of sales process most suitable: competitive or “one-to-one” negotiations. In this phase it is necessary to develop an internal due diligence to identify and take corrective measures in internal operational, legal, contractual, tax and other aspects, anticipating or improving current situations of the company that could have a negative effect on the final price of its sale.
Determining the value of the company
This stage aims to obtain a range of value for the company that will serve as an indicator to shareholders to establish a sale price. The contracted financial advisors evaluate the business, perform valuations and set goals and expectations. It is common that in this stage also participate lawyers specialized in this kind of transactions and the financial and accounting team of the company.
Preparing the information
This stage includes the preparation of the documents to be submitted to the interested candidates: the Company Profile (usually a sheet), the Confidentiality Agreements and the Information Memorandum or Company Information Package (extensive document with complete details of the business that will be delivered to potential buyers). In this stage the list of potential buyers is drawn up.
Promoting the transaction or “going to market”
In this stage, contacts are established with potential buyers to offer them the investment opportunity. At this stage, the confidential treatment of the process is very important. The information should be given only to those potential buyers willing to sign a confidentiality agreement who will receive enough detailed information about the company so they can conduct their own analysis and make a preliminary offer. The assistance of a specialized advisor at this stage is crucial for the owners of the company for sale, as the advisor serves as liaison and coordinator to meet the requirements and clarifications that arise from the interested parties in the purchase of the business and allows the Business management on sale focus on your business functions.
Negotiation and due diligence
At this stage the main goal should be to obtain a Letter of Intent from potential buyers. The team of transaction advisors must simultaneously negotiate letters of intent in order to obtain the best terms for their client. Once the best offer is obtained from the universe of offers obtained, negotiations begin, among others, the negotiation of the Sale and Purchase Contract and other documents that must lead to the closing of the sale of the company. At this stage the purchase due diligence is performed and the possible findings of the due diligence between the parties are negotiated.
The definitive agreements are signed at this stage and the purchase and sale advisors continue their work until they settle and collect all payments including those related to guarantees on the behavior of financial and operating magnitudes for a set period of time ( Eg payments tied to income, earnings, etc.), if applicable.
The sale of a company is an intense and emotional process for the seller, in which the dealbreakers must identify, as much as possible, in the earliest stages of the process. Do not hesitate to seek the advice of specialized professionals with proven track record in this kind of transactions.