After the Dance

Steps to Selling your Business Part 28.

Your Management Visits are over. You are sick of hotel boardroom coffee, dreaming in pre-scripted responses to questions about your run-rate analysis, and—if you’re like most—may feel a little exhausted, talked-out, and out of adrenaline. 

These are signs of a robust and healthy round of Management Visits. After a day of golf, a weekend with your family, or a glass of good wine, you will be recharged and back to work in short order.

Our next step is to require the top buyers to submit a Letter of Intent (LOI). 

If we think of the sale of your company to the perfect buyer as a marriage, then the Letter of Intent is an engagement proposal. Our goal is to get the best buyers to make a “proposal”.

Every interested party now has had more access to your numbers and has a better grasp of both the big-picture information and the granular details of your business. They have met you in person, have compared you to their metrics and acquisition criteria, and are now in a position to formalize an offer. 

This is the moment we will likely see our least-preferred prospects step away of their own accord with little effort on our part, while the most interested will show their real interest.

As prospects reassess, your Advisors should be working hard: 

1. Anticipating who remains interested 

Throughout your face-to-face meetings, your Advisors observed the other side, took careful and detailed notes, providing invaluable information. Although Advisors can’t control what prospective buyers are thinking, their deep experience and trained observational analysis should give them great insight in predicting whether a party will continue in the process. A great Advisor will help focus your energy on productivity and will not waste time with a buyer who will ultimately come back with either, “we aren’t interested” or a low ball offer.

2. Determining the shortlist

In short, the task is to once again cull the list of acceptable buyers. There are several factors at play in doing so – not least of which is what your heart is telling you. Skilled Advisors help clients make the best-informed choice based on the most important factors. I will unpack this in greater detail in our next post because it’s a critical step.

3. Following up with each candidate

Your Advisors must now follow up with every party you met with during Management Visits, soliciting comments and feedback and answering questions that come up in real-time. Even input from less-valued candidates gives insight into how your business has been communicated. Now the primary goal is to make it easy for the most interested prospects to move from interest to intent.

4. Strategizing on upcoming negotiations

Your Advisory team now knows a lot more about the people who are considering the purchase of your business. Negotiation is an expert’s game (and one that the best M&A Advisors thrive on) that starts early. At this stage, we take what we have learned about each buyer prospect and are strategizing on the best systems and tactics to use when negotiations begin. We develop a firm plan ready to support our clients as they evaluate and negotiate offers with each buyer. 

To be clear, the ‘proposal’ contained in the LOI should not be a simple “will you marry me?” The LOI should be a detailed document that clearly outlines the ideas of what a final arrangement will look like, including the value they see in your company and the possibilities for the future. This is the kind of information you need to make the right decision.

I have seen this proven in deal after deal: it matters whom you choose—not only to get the price you deserve but also to walk away knowing that you have left your legacy in the right hands. With our clients, we give them every resource they need to determine and say “Yes!” to the right buyer.

If you are planning to divest your business or have questions for one of our Advisors, please contact our team today.

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Written by: Douglas Nix