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?
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
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.
The earlier the better, but even a year ahead of your planned sale date gives you some useful advantages.
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