The timeframe required to sell a company depends on many different factors such as the transaction size, quality of the seller’s financial information, management dept, size of the buyer pool, etc. In general, though, you should expect the transaction to close about 9 months after you hire an investment banker.
Here at CenterPoint we break down the process of selling a company into three stages, each of which takes between 60 and 90 days.
Stage 1: Preparation & Planning
Preparation and planning are a critical part of achieving a successful transaction. It generally takes between 60 to 90 days to complete all of the preparatory work before taking the business out to market. Properly preparing the company for sale makes the rest of the process more efficient and increases the certainty of closing. During the preparation and planning stage we:
- Determine the most appropriate transaction structure for the seller’s situation
- Address any confidentiality concerns
- Recast the financial statements to adjust for non-recurring expenses or owner perks
- Value the company to determine its worth in the current market
- Recommend specific actions to increase the value of the company
- Identify strategic and financial buyers with the resources and to acquire the company
- Prepare a comprehensive information memorandum for use with prospective buyers
Stage 2: Marketing the Company
Creating a competitive atmosphere for the company among interested buyers is instrumental to achieving the highest value and best terms. During the marketing stage we keep all buyers on the same time frame and coordinate the dissemination of confidential information in order to conduct a competitive controlled bidding process. This stage takes around 90 days but varies depending on the size of the buyer pool. In some instances, we have targeted only a handful of strategic buyers. In others we have contacted a pool of over 200 private equity and strategic buyers. During the marketing stage we:
- Contact buyers on a confidential basis and determine their desire to pursue the acquisition
- Negotiate non-disclosure agreements
- Prepare and coordinate management presentations
- Pare down the list of interested buyers to those who have indicated the highest value
- Request best and final offers from the remaining buyers
- Select the best offer and negotiate a Letter-of-Intent
Stage 3: Closing the Transaction
Once the final buyer is selected and a Letter-of-Intent has been signed it takes approximately 60 to 90 days to close the transaction. Because time is the enemy of all deals, we keep the transaction on track and work to avoid any significant delays which can potentially disrupt the sale. During the closing process we:
- Assist the owner in collecting and disseminating the due diligence requested by the buyer
- Work with the owner’s attorney to negotiate the final purchase documents
- Keep all parties “honest” to the terms and conditions that were agreed upon
- Successfully close the transaction… the deal is not done until the wire transfer has hit your bank account.
Our experience with completing over 130 transactions has shown that managing and executing a well-constructed M&A process achieves the best results for the seller. Our experience has also shown that this process on average takes about 9 months.
Want to learn more? Give us a call. We’re always happy to talk.