What to expect when selling a business

Due Diligence

Selling your business is often a difficult decision. This is especially true if you’ve built it from the ground up, almost as if you’re saying goodbye to one of your children. Naturally, for both financial and emotional reasons, sellers want to know what to expect when selling a business.

Throughout our many transactions helping business owners connect with buyers, we’ve endeavoured to create a clear, streamlined process. Today, we want to specifically outline how selling your business should include a detailed five-step undertaking from a reputable corporate finance advisor such as our firm.

Due diligence during the initial partnership phase

After partnering with a corporate finance advisor, the first step is due diligence review of all aspects of your business. Think of this as preemptively overcoming objections a potential buyer may have when they’re considering a M&A with your firm.

Understanding the myriad of issues that a buyer may encounter is the first step in ensuring a smooth transition. For example, a potential new owner may have concerns or objects over your current organizational structure; perhaps you have too many middle managers or redundant department heads. Whatever the case, due diligence will identify “problems” (that may not be problems in reality, but could still turn a buyer away) and offer solutions to mitigate them.

Thoroughness of document preparation

Have you heard of the term Information Memorandum? In essence, it’s a thoroughly thought-out document that breaks your business down into an easily digestible report. It may be less than 20 pages in length but will identify any potential risk to the business and its profitability, customer details, employee breakdown profiles, revenue estimates, marketing and company overviews, as well as long-term financial projections.

 Another way to think of your IM is as a sales document. Here, potential buyers can see a quick snapshot of what your company offers in a M&A scenario.

Effective marketing and promotion

Selling a business is only as effective as the marketing and promotion behind it. All of the due diligence and IM development in the world won’t increase the likelihood of a completed deal if you don’t have expert marketing from your corporate finance advisor.

 Of course, marketing is more than simply placing a For Sale ad in the local classifieds. Rather, M&A marketing focuses on developing a dialogue between you as the owner and the buyer as the new owner. Note that any potential buyer, at this phase, will have signed an NDA before receiving a copy of your IM. Leading up to that, marketing strategies for selling a business will be contingent on finding the correct marketing outlets, engaging in actionable conversation with potential buyers, and soliciting offers from reputable interested parties.

Initial negotiations and the Heads of Terms agreement

With all things being equal, initial negotiations with a potential buyer will take place typically around the ten-week mark after signing with our firm. After soliciting offers, we’ll select the one we feel is most suited to your company. Next, we’ll schedule a face-to-face meeting between both parties to engage in the initial negotiations critical to successfully selling a business.

Here, your due diligence can pay off as the efforts we made during step one can often lead to more effective price negotiations with any potential buyer. In fact, selling a business can be extremely successful based on the more pre-negotiation work you complete with your corporate finance advisor. It’s a lot of preparation but can pay off dividends in the end.

Once the initial negotiations look promising, we’ll create a Heads of Terms agreement for both parties. In essence, this will summarize the details of the transaction which can include arrangements and a set of instructions laid out for the transfer of ownership.

Deal execution and completion

The next step can be the most costly for both parties, which is why it’s so important to be as thorough as possible up to this point. From legal fees to drafting agreements, deal execution and completion is the final phase of selling a business. We’ll actually conduct most of the work behind the scenes on your behalf, creating a seamless process that (while highly detailed) allows for the final sale to proceed without any problems or concerns.

Selling a business with Venture Corporate Finance

Entrepreneurs and business owners alike often come to us as their corporate finance advisor because they recognize both our transparency in the selling process as well as our commitment to success. From the moment we partner with you, we aim for clarity while creating a smooth transaction for all parties. From initial assessments and evaluations to completing the deal and beyond, we’ll stand by you every step of the way.

Would you like to learn more about our services? Then contact us HERE and fill out our short form. A member of our team will be in touch soon.