6 Key Steps Of Selling Your Business

If you’re thinking about selling your business this year, you might be unsure about the best places to start, who needs to be involved and the process of selling a business.

In this article, we will go through 6 key stages of selling a business and areas that you should consider before selling your business.

Step 1 – Assess Your Options

Selling to a competitor is the most traditional way to exit a business and receive significant value from selling your equity.  However, there are many other options available to shareholders such as Management Buyouts, Private Equity investment and Employee Ownership Trusts.

You should initially ensure that you understand all the various options available to you, their potential returns and timescales on which to make an informed decision.

Is the business worth what you think it is (or it needs to be)?  If the value you will receive from selling is not at the required level to meet your ultimate plans and objectives, now may not be the right time to sell (or may not be the best option).

Also, assess what you will do next.  Stepping away from a business that you have owned for many years is a big change and you need to be comfortable that it is right for you.

Step 2 – Appoint Business Advisors

Once you have started to assess the above, we would always suggest appointing advisors.

Selling your business will likely be life-changing for you, allowing you financial freedom and providing you with the rewards for many years of hard work.  You could risk a successful transaction by failing to appoint the right advisors to help you to deliver.

It is also important to distinguish between those advisors who may only help with steps 3 & 4 (below), and those who will advise you through to completion (including steps 5 and 6 which will likely be the more complex and stressful stages).

CN Strategic Advisors can help you answer the questions in step 1, providing you with the visibility of options.  We will then deliver all aspects of steps 3 – 6 to execute the desired transaction and use our years of experience to ensure this is successful.  As business owners ourselves, we are well placed to understand key decisions from your perspective.

After appointing a Corporate Finance / M&A Advisor such as us, other key advisors will include corporate lawyers that can deliver the key legal documents as part of the transaction.

Step 3 – Preparing Your Business For Sale

The sale of a business is complex and can be intrusive for periods during the process, for instance during Due Diligence (where the buyer is looking into the finer details of the business including financials, legals and commercial matters).

Therefore, it is important to ensure that key documents and financials are available, complete and accurate.  For a controlled sale process, an information memorandum is also compiled to provide the background to the business and position in the best way to be informative and enhance value.

Readily available information alongside a professional information memorandum will help with presenting the business in the best way to highlight key strengths and USPs, as well as providing sufficient information for a buyer to make an informed offer.  It will also ensure that a buyer’s confidence is not lost through the process by poor or delayed information, as this increases the risk of a deal aborting.

Step 4 – Marketing Your Business

There are various approaches to ‘marketing’ the business which can depend on the business, sector and preference of the owner.

Although we recommend a Non-Disclosure Agreement (“NDA”) is signed by interested parties prior to receiving confidential information, many owners also want to keep the awareness that the business is ‘for sale’ to a minimum.

‘Marketing’ the business can be by approaching only a limited number of potential acquirors, a longer list only, or could be by circulating a one-page ‘teaser’ document to lots of businesses, advisors and intermediaries via various platforms.

Your advisor should discuss the right approach for you, and how they will identify the potential buyers and approach in the first instance.  A good advisor should discuss the options with you and be able to deliver the option best suited to you and your scenario.

We find that most clients would opt for a discreet marketing process to control who is aware of the potential transaction.

Step 5 – High level negotiations and selecting preferred bidder

Once interested parties have made an offer, there will likely be rounds of negotiating the key commercial terms.  At this stage you should fully appraise the offers against your ultimate objectives including; value, structure and deliverability alongside the potential fit of the buyer, their strategic rationale and ability to execute a transaction.

Once the preferred buyer is chosen, it is likely that the offer and key commercial terms will be drafted into a formal Heads of Terms with exclusivity, on which both parties can use to move forward the transaction.

Step 6 – Deliver the transaction

Once an offer is agreed in principle through signed Heads of Terms, it is then time to work on agreeing the finer details of the transaction.

The delivery can be complex, time consuming and deal value can still be impacted throughout this period from diligence conclusions through to completion mechanics.

It is important to maintain momentum and ensure that business performance doesn’t suffer – if you are concentrating too much on transactional issues rather than ongoing business ones, the buyer may lose confidence.  CN Strategic Advisors can really add value to this process through their experience, negotiating skills, ability to manage several parties and create a buffer for you as an owner.

The main matters during the ‘delivery’ stage are Due Diligence, Legals and agreeing the final deal structure / completion mechanics (as well as ensuring the Enterprise to Equity Value bridge still works for you as a seller).

Want to discuss your current plans to sell your business? – we are always here to help, and as a privately owned family business, we are well placed to advise from both an advisory and entrepreneurial perspective.