Six Minute Strategist – A Mini Guide to Selling a Company Part 2

Welcome to Part 2 of my mini guide to Selling a Company.  I hope you found Part 1 interesting.

In this post I shall be covering the topics of Proceeds, Process and Proposal.

Stage 4 – Proceeds

1. Valuation – Evaluate and establish the likely valuation of the company – understand the history, current trading and forecasts along with risk factors

2. Acceptable Outcomes – Agree in advance the acceptable outcomes of the proceeds – all shareholders to commit to this

3. Nature of Proceeds – Discuss and agree the nature of acceptable proceeds – cash, shares, loan notes etc.  Different shareholders may have different priorities

4. Comparable Transactions – Consider comparable transactions and valuations

5. Valuation History – Measure against historic investment and valuation

6. Ability to Pay – Evaluate the ability and inclination to pay against the potential acquisition partners – consider historic transactions, funding, access to capital markets, current balance sheet strength

Stage 5 – Process

1. Contact – Contact buyers – identify and contact key executives in buyers, distribute teaser, sign NDA, issue Information Memoranda, answer questions for further information

2. Indicative Response – Request indications of interest and value – issue a standard set of terms asking potential partners to scope their proposals within this framework

3. Short List – Establish short list of potential partners – negotiate terms with short list – then move negotiations with limited number (1,2 or 3) into due diligence phase, key conditions, evidence of finance (ability to pay)

4. Stage 1 Due Diligence – Prepare and issue first draft of sale and purchase agreement – vendors lawyers to prepare – provide access to data room (possibly on a limited basis – data room 1) to potential buyers, management presentations and site visits if appropriate

5. Stage 2  Due Diligence – Exclusivity and time table to completion; complete due diligence (data room 2) and finalise negotiations with purchaser.

6. Close – Complete sale and manage communication with external and internal stakeholders – shareholders, management and employees

Stage 6 – Proposal

Adviser’s Engagement Terms should cover:

1. Retainer – Monthly Retainer

2. Success Fees – Min Success fee

3. Ratchet – Success Ratchet

4. Costs & Expenses – Reasonable costs and expenses

5. Progress Reports – Regular progress reports

6. Alignment of Interest – Fee structure aimed at aligning interests of Adviser with shareholders

I hope you have found these two posts helpful.  I have uploaded the presentation to Slideshare. If you like this please post a tweet to spread the word.  Thank you.