For best results, SSK Capital recommends that you:
Use a multi-bid process
Reach out to 75-100 prospective investors
Set a 30-day deadline for Indication of Interest (IOI)
Develop a 30-day process for management meetings and Letter of Interest (LOI)
Drive closing by front-loading diligence as much as possible
Prepare in advance
Evaluating Readiness for Sale
- All principals agreeable to sale?
- Offer price agreed upon?
- Likely terms agreed (equity roll, contingent compensation)
- Team identified (bankers, attorneys, accounting, SMEs)
- Industry in favor?
- Likely investors already identified, and terms discussed?
- Business easy to understand and value?
- Company size: EV > $20 million?
- Not distressed or startup?
- History of stable cash flows and management?
- Variance analysis OK compared to industry margins and ratios?
- Risk register developed?
- Technology or principal risk? Concentration risk among customers or vendors?
- Outstanding litigation?
- Unquantified risks around employees or environment?
- Financials audit for the last 3 years?
- Data available to populate data room?
- Key business processes mapped?
- Key documents available and indexed?
Be prepared to manage a 6 to 9-month process
Typical Timeline for a Transactioon
Mid October – December
- Define sales strategy
- Conduct advisor due diligence
- Prepare confidential information memorandum (CIM)
- Prepare confidentiality agreement (CA)
- Generate list of prospective buyers
- Prepare virtual data room
- Distribute CAs and CIMs to prospective buyers
- Prepare form of purchase agreement
- Prepare management presentation
- Solicit letter of intent
- Identify preferred bidders
- Open data room to second-round bidders
- Management Presentations
- Facility Tours
- Distribute purchase agreement
- Identify winning bidder based on price and terms
Structuring, Negotiations, and Closing
March – April
- Finalize purchase agreement
- Closing and funding transaction
Start preparations early
If you start 10 years ahead of your target sale date, you still have time to do serial acquisitions or develop and sell a new product.
If you start 3 years ahead of the target date, you have time to get really solid financials, avoid any black eyes like losses, and perhaps still pull off and integrate a good acquisition. You can get the biggest benefits of tax-planning if you start here or earlier.
If you start a year before your target date, you can avoid some of the biggest tax planning blunders, ensure your financials are audited before you go to market, settle any outstanding legal issues, and move along any employees that need to go.