The business sale process has a number of distinct stages and typically takes 6 to 10 months to complete.
There are strategic and financial buyers. The best buyer is the one that benefits the most from the purchase.
A business's value is determined by market comparables as well as business specific analysis.
A second bite at the apple means, a second chance or opportunity. In the case of Private Equity (PE), it means selling part of the business and then working with a private equity partner to create value and selling the remainder, at possibly even a larger amount than the first. But, before we go there…
Public company take-over bids typically consist of all cash or a combination of cash and shares. Consideration in private company acquisitions will usually include a sizable portion in cash (50 to 100%) but will often include an unsecured note and/or an earn-out. This is typically because: (i) the buyer does not have (or have access to)…
Why is the Letter of Intent (LOI) so important? Because, in the context of a business sale, it marks the critical point where power shifts from the seller to the buyer. What I mean by this is that an LOI typically includes a term requiring exclusivity. Exclusivity means the seller has to stop engaging with…
The due diligence process is an investigation of a business or person prior to signing a contract. More specific to a business sale, business due diligence is the process of verifying the representations made in the CIM and other marketing materials provided to the potential acquirer by the seller. For example, in a CIM it…
Buyers remorse: does paying more for a business than anyone else mean you have overpaid? Not necessarily. When managing a company divestiture, there comes a point when interested parties are requested to provide non-binding expressions of interest (called an EOI, this is the first indication of value based on reviewing the CIM and answering select questions,…
There are a number of approaches to valuing a business. There are market based approaches such as public company trading multiples and comparable transaction analyses and cashflow and earnings based methodologies such as the Discounted Cashflow (DCF) analysis. In this post we review both market based approaches and company forecast analysis. Comparable Transaction Analysis Let’s…
All Purchase and Sale agreements (“PSAs”) have sections called buyer and seller reps and warranties. The intent of these sections is to disclose and describe any known issues in the business and to address how they will be dealt with. It is generally accepted that any issues that come up post-sale, but that existed or…
The post, Merger & Acquisition (M&A) Acronyms, Abbreviations and Definitions described the various terms used throughout the M&A process. Here we list Mergers and Acquisitions definitions alphabetically and try to add a little color about their significance. CAGR: Cumulative Average Growth Rate. For example, revenues growing 30% in the first year, then 10 % in…
The Purchase and Sale Agreement (PSA or SPA in the case of a Share Purchase Agreement) is one document in a set of final documents that completes a company sale transaction. Other documents typically include employment agreements, escrow agreements, non-competition agreements, releases, schedules and more depending on the type of transaction being contemplated. Importance of…
How do you select the best possible buyer for your business? There are many criteria to consider but two key ones are an ability to pay and an interest in paying a premium. Assessing the ability to pay for private companies is not as straightforward as it is for public companies, which have to disclose their…
