Selling a Business
Frequently Asked Questions
What are the main steps in the sale of a business?
|Summary of the Sale Process|
|Conduct Due Diligence on the company for sale and its industry, and establish a value range|
|Prepare “Confidential Corporate Memorandum” (business and financial overview) and video, develop buyer list|
|Issue “Blind Profile” to prospect list, qualify interested buyers, execute “Confidentiality Agreement”|
|Issue “Confidential Corporate Memorandum” and video to qualified buyers|
|Q&A submissions, first round bids submitted, management meetings with top bidders|
|Negotiate and advise on “Letters of Intent”|
|Negotiate “Purchase & Sales Agreement”, facilitate closing|
|Maximize value for shareholders|
|Accomplish shareholders’ stated objectives|
|Close the transaction in a timely manner|
|Minimize business disruption|
|Maintain options and flexibility for seller|
How do I sell my business without anyone finding out?
When Springbank first approaches potential buyers of your business, we do not identify your company by name. Instead, we provide potential buyers with a “blind profile”, or an anonymous overview of your business, including where you are generally located, the industry you are in, the types of products or services you provide, and high-level financial information.
Your company is not directly identified to potential buyers until they are vetted and qualified, and sign a confidentiality agreement. At that point, Springbank provides qualified buyers with a “Confidential Corporate Memorandum” and a video that describes your business in greater depth. Your employees and the public do not learn the company is for sale until you want them to.
Will my company be attractive to a public company?
Possibly. Springbank’s network of strategic and financial buyers includes firms and investors who deal with public companies. Springbank recently sold a private company to a division of a public company.
Will a valuation sell my business at the highest price?
A valuation provides you with a realistic assessment of how much your business is worth. Springbank takes this information to our network of potential buyers and markets your company to create interest and excitement for the deal. We develop a compelling video and presentation, demonstrating your company’s strengths and potential for future growth. This process often creates a competitive bidding situation with multiple offers that can drive bid prices up.
Do buyers buy private companies based on EBITDA or some other criteria?
Bid prices are generally based on past, current and projected future performance of the company, along with a multiple of EBITDA specific for the industry you are in.
What is the best way to promote my company to potential buyers?
Targeted marketing of your business to potential and qualified buyers is the best way to promote your company. Hiring an experienced M&A professional with a strong network of buyers and a proven track record of closing deals can help you receive a greater number of higher priced bids for your business.
What are the most common reasons a deal doesn’t close?
The M&A process can take several months to complete. During this time, if the financial performance of the seller does not meet stated forecasts, the business loses value in the eyes of the buyer. It is important sellers continue to run their businesses with the same rigour and attention they would have if they planned to own it for years to come.
Another reason a deal might fail to close is if surprises arise during the due diligence process, either on the part of the seller or buyer. Springbank works closely with clients throughout the due diligence process to make sure surprises don’t happen. We also stay in close contact throughout the entire lifecycle of the M&A deal to ensure both sides of the deal feel comfortable with and trust all players in the deal.
What is the typical post-sale management transition arrangement?
The current owner usually remains on the management team for a pre-determined length of time to help transition the business to the new owner. The current owner is typically compensated based on an estimate of what it would cost to hire someone to replace him or her with the same skill set, experience and knowledge.
Where will the closing take place?
With your attorneys you can finalize the deal in person, or, as is more often the case, by fax. After both sides have signed all the necessary documents, funds are wired to the seller’s bank account according to the schedule both parties agreed on.Mergers & Acquisitions