Acuity Mergers + Acquisitions helps Exiting Owners actively market their business to the right buyers.
Step One: Assess Value and Negotiate Terms of Sell-Side Representation
Before proceeding with Sell-Side Representation, it is important for the advisor and the owner to agree on the likely value of the business. Advisors typically conduct a market-based analysis of the business to ascertain the range of likely selling prices. If the owner and the advisor are not in agreement on what the market is likely to pay for the business, any subsequent Sell-Side Representation will be negatively affected.
For this reason, an initial value assessment of the business is the starting point for Sell-Side Representation. There is often a fee associated with the value assessment, but that fee is generally credited against any success fee due at the end of the Sell-Side Representation.
It is standard practice in the intermediary industry for Sell-Side Representation to be exclusive. This allows the advisor to be fully committed to investing the time and effort needed to market the business effectively. While there is some room for negotiation depending on the state of the business, the final result needs to compensate the advisor for the value of his services, just as the final deal should compensate the business owner for the full value of the business.
Most Sell-Side Representation Agreements include an initial retainer that is then credited against the ultimate success fee. The success fee is typically calculated using an industry-standard formula applied to the final deal value.
The most important part of the Sell-Side Representation Agreement, however, is a clear definition of what the advisor will do and how the business owner will help. It is critical that everyone involved be on the same page with respect to expectations and responsibilities.
Step Two: Market the Business
This step begins with the advisor preparing a Confidential Information Memorandum (CIM) that tells the company’s story in enough detail to allow a potential buyer to decide whether or not to continue pursuing an acquisition. This step may also include an assessment of the business’s value based on market data.
Once the CIM is completed, the advisor will prepare a one-page generic summary and will begin marketing the business using multiple channels. The advisor keeps the identity of the company and other critical information protected until a buyer has been qualified and has executed an appropriate NDA. The advisor continues to protect sensitive information throughout the process to ensure that only necessary information is released at the appropriate times.
Acuity Mergers + Acquisitions distinguishes itself from most advisors in the market by adding an active search component to the typical networking channels available in the Mandamp;A industry. We develop a list of potential buyers based on the unique characteristics of the company to be sold that includes possible buyers who may not be actively seeking an acquisition. We then contact these potential buyers to gauge their interest in making an offer. This active marketing approach ensures that our clients are not missing prime opportunities simply because a possible buyer is not actively seeking an acquisition.
This step ends with the advisor presenting an offer to purchase to the business owner. If the business owner provisionally accepts the offer, then we move to the next step. It is not uncommon for a series of offers and counteroffers to evolve before final acceptance. If the business owner ultimately rejects the offer, then we continue with marketing the business to other buyers.
Step Three: Due Diligence
During this step, the advisor collects information for and delivers information to both the buyer and seller to assist both sides in fully understanding the details of the deal. The advisor helps the buyer obtain the information necessary to verify the value of the business. This is often important for obtaining financing for the deal. The advisor helps the seller and other professionals involved in the deal ensure that the terms of the deal are structured appropriately. This is particularly important when the deal involves owner financing or an earn-out.
Step Four: Closing
Once all contingencies are satisfied and all necessary financing is finalized, the advisor assists the parties involved in creating and compiling all the documentation necessary for the final transaction. When the deal involves real estate, this may include coordination with a title company and other professionals for a parallel closing on the real estate. The advisor ensures that all relevant professionals (e.g., attorneys, accountants, etc.) have reviewed and approved the deal structure and the documentation prior to closing.