The decision to sell a business is always a significant one for the company’s owners and necessarily involves a large commitment of time and resources. That’s why we have developed a formal process for selling a business that achieves a successful outcome for owners whilst maintaining utmost confidentiality and minimising day-to-day business disruption.
In this post, we walk through our successful process, highlighting key aspects of each stage and providing estimates of how long each step is likely to take. The timeframes are indicative only and are determined largely by the speed with which clients can provide the necessary information.
Stage 1: Initial Contact
- Key Elements: On being introduced to a new client, we will have a confidential, no-obligation discussion to learn more about the business and to understand the owner’s motivations and expectations for a sale. We then determine whether it is an assignment that we are likely to be able to successfully complete. We like to be up-front with parties at this stage. If we do not believe we will be able to sell a business within the owner’s expectations (price, timeframe, terms etc.), we’ll tell them.
- Est. Timeframe: 1 hr.
Following a positive initial discussion, CFSG will prepare a proposal that includes a draft Letter of Engagement for discussion purposes.
Stage 2: Scoping Stage
- Key Elements: On completion of the Letter of Engagement, we prepare a detailed scoping study that sets out, amongst other matters, who we believe the most likely acquirers are and the likely fair market value for the company. To assist us in preparing this scoping study, we will look to obtain detailed financial and-non-financial information about the company.
- Est. Timeframe: 2 – 4 weeks.
We will present the scoping study to the client for their consideration and internal discussion. Once there is agreement on the basis for moving forward, we begin working on the next stage of the process, business preparation.
Stage 3a: Business Preparation
- Key Elements: The next step is to prepare the business for sale so that it is presented in the best possible light to prospective acquirers. This will involve providing specific recommendations for maximising the company’s value such as the engagement of directors, executives and management, formalisation of various contracts and other documentation, pursuit of specific growth initiatives, the preparation and presentation of historical and forecast financial data and so on. Part of this process also involves considering possible gaps that will need to be filled for subsequent due diligence.
- Est. Timeframe: 4 – 6 weeks.
Stage 3b: Business Preparation
- Key Elements: Whilst working on preparing the business for sale, CFSG will also begin preparing the necessary marketing documents that will form the basis of the upcoming marketing campaign. This will involve the preparation of a Confidentiality Agreement (CA), the drafting of a no-names flyer as well as a more detailed Information Memorandum (IM). In addition, CFSG will begin collating the required material needed for due diligence.
- Est. Timeframe: 4 – 6 weeks (runs concurrently with Business Preparation activities).
Once the business has been prepared for sale, we will work collaboratively to finalise the marketing material and develop the marketing strategy.
Stage 4: Marketing Strategy Development
- Key Elements: Based on CFSG’s understanding of the relevant industry and our firm’s extensive contacts among both strategic buyers across many industries as well as private equity firms, CFSG will prepare a marketing strategy for the business. This will involve preparing a short-list of prospective acquirers, both within Australia and globally, and outlining the recommended process for reaching out to these possible buyers.
- Est. Timeframe: 2 weeks.
Stage 5: Marketing Implementation
- Key Elements: CFSG will commence the marketing process by reaching out to the short-listed acquirers for the company. To that end, CFSG will contact each party and provide them with a no-names flyer on the company. For those parties that express an interest, CFSG will have them sign the CA and then distribute the IM. The IM will include an Expression of Interest form that sets out the price, terms and conditions upon which the buyer may complete a transaction. In addition, CFSG will work with the client to answer any questions buyers might have and will also arrange phone hook-ups, site tours and meetings as required.
- Est. Timeframe: 4 – 6 weeks.
Throughout the marketing campaign, CFSG will keep the client fully informed of all developments with both real-time updates and comprehensive weekly summaries.
Stage 6: Term Sheet Negotiation
- Key Elements: For those parties that have put forward an indicative offer, usually a Term Sheet, CFSG will negotiate with them on the client’s behalf to secure the most favourable terms possible. Ideally, this process should result in multiple offers being received. This stage may also involve CFSG conducting a final round private auction between buyers to elicit the most attractive offer.
- Est. Timeframe: 4 weeks.
Throughout the negotiating process, CFSG works closely with the client to fully understand their preferences and to achieve the most favourable outcome.
Stage 7: Detailed Due Diligence
- Key Elements: Most term sheets will be subject to the prospective buyer undertaking detailed due diligence investigations into the company. CFSG assists in this process by establishing a data room for the client and granting select parties access. Buyers also usually request further clarification and information and follow-up meetings with management and site visits. CFSG will also assist the client in instructing their lawyers to prepare the legal documents needed to finalise the transaction.
- Est. Timeframe: 6 – 12 weeks.
Stage 8: Closing
- Key Elements: CFSG will assist the client to complete the signing of all key documents and advise on any post-completion adjustments.
- Est. Timeframe: 1 – 2 weeks.
As this indicative process shows, selling a business is an involved exercise that may take six months or more to complete. That is why CFSG has developed a clear methodology that guides a client sequentially through the process. If you would like to have a confidential discussion about how CFSG can assist you in successfully completing the sale of your business, please contact us.