As everywhere in our economy, the success of M & A sales process is based on supply and demand. A structured and systematic approach for a company sale is the most important part. This includes a thorough analysis, careful research and an attractive information memorandum. In the following, we outline the project schedule of a professional company sale.

The Project Course

For a company sale you should schedule enough time - normally 6 to 12 months. The following graphic illustrates the projects steps and gives you a rough indication of the respective time required:

company-sale-steps

Figure 1: Illustration of the project course on a corporate sale

1. Company Analysis, Information Memorandum and disguised company profile

The company which is going to be sold will be subjected to a thorough analysis. The consultant must obtain a comprehensive overview of the company and its situation. During this process, the information memorandum and the blind profiles are developed. The analysis also includes a rough assessment of the transaction object.

Information Memorandum

This memorandum describes the transaction subject with an extent of about 50 to 200 pages. It provides a combination of hard facts and reference information for a detailed picture of the companies situation to interested investors. In addition to a company profile, products and services, as well as the financial data, further aspects of the business, such as market and competitive situation are presented. Of course, the main points and key factors are briefly summarized from the perspective of a potential investor.

This information memorandum contains sensitive data and is given to interested investors only after an assurance of strict confidentiality, usually by a confidentiality agreement.

Blind Profile / Teaser

A blind profile or teaser is a brief description of the companies properties in anonymous form. It is intended to describe the transaction object to prospective buyers so that a decision on a further in-depth study of the purchase can be made, but without allowing conclusions as to the identity of the object.

The blind profile is submitted to selected potential investors.

2. Verbalization of the M & A strategy

A company sale calls for a delicate targeted sale on the market. On the one hand the response of many interested parties increases the probability of success and the chance for a higher selling price. On the other hand, a sale requires a high degree of discretion, not to worry suppliers, customers and employees. In addition, the respective goals and motives of each shareholder, different ways transaction and transaction structures, as well as tax and legal issues want to be considered.

All these aspects of a sale must be considered and weighed in developing the M & A strategy. You decide how to proceed with the transaction.

3. Research of potential customers

Derived from the M & A strategy target groups (potential purchaser) are defined, to be specifically addressed. Criteria can be, for example, national and international competitors, companies at preliminary economic levels or certain financial investors. Systematically a list of potential buyers is built, called longlist.

4. Preselection and first definition of target investors

The longlist created in Step 3 will be discussed together with the seller. The generated shortlist includes those companies to be contacted in one or more stages.

5. Approach of selected potential investors

The potential investors are approached in writing and / or personally to deliver the blind profile, during this process, the potential investorsare examined in terms of their interest to pursue the proposed corporate acquisition further. With selected investors strategic alternatives and ideas / synergies such an acquisition are discussed.

If interest is confirmed, the confidentiality agreement will be signed by the investor. After that, the company for sale is disclosed and the prepared information memorandum will be provided.

6. Coordination of information meetings and Letter of Intent (LOI)

Following the disclosure, the investors must be professionally managed and led. After reading the information memorandum further information needs to be exchanged. Likewise, a first meeting between potential buyers and sellers and possibly a site visit must be coordinated. Ultimately, with those who are still interested in the purchase, an indicative bid, called Letter of Intent (LOI), needs to be negotiated and agreed - a special difficulty is that all LOI should be submitted in a narrow time window.

7. Review and evaluation of offers

The indicative offers received will be evaluated together with the seller and the M & A advisor and a ranking of prospects is created. In addition to pure price indication, other factors such as job protection or payment arrangements (such as an earn-out clause) are considered.

8. Coordination Due Diligence

If desired, the information gathering and conduct of due diligence will be prepared jointly with the financial management of the company and the auditor. The examination process is coordinated with the potential buyer.

9. Conduction of the final negotiations

After the due diligence is carried out successfully by the buyer, negotiations on the details of the transaction contract, as well as any accompanying agreements such as competition rules, real estate purchase contracts, etc., will be executed.

During the due diligence and the final negotiations, the M & A consultant is in demand as a mediator between both parties. So that a successful business sale doesn't fail because small points can't be solved.

10. Signing / Closing

At the end of the whole process the transaction agreement will be completed. With the signature of the buyer and the seller, the business sale is complete - the work of the M & A consultant has been a success.

In Conclusion

A company sale is a long, nerve-wracking process, which should be started early and be well structured. A company selling out of necessity, for example because there is no successionis also possible, however, associated with drawbacks in the sale price and a lower probability of success.

Professional guidance through the entire sales process pays off. The time requirement, many stumbling blocks and not at least the game against experienced buyers leads to a quick failure or a "success" selling well below market value.