After many years of working in business development and Mergers & Acquisitions in the investment banking field as CEO and Senior Managing Director, what is most clear to me is that no two businesses or business owners are the same. Because of this, every sale process of a company requires a unique focus and strategy to best prepare for a successful transaction.
What is universal, are the critical steps that should be taken by a business owner and their advisors to best prepare a company for sale—providing them with the plan and tools to both add value and expedite the process.
Step 1: Developing a Transaction Strategy
Understanding the objectives of a business owner (client) for the sale of their company is the fundamental question that needs answering. Some owners are constrained by time, some are looking to maintain the core values and culture of their company, some wish to leave the business at the time of sale, while many are focused on securing the highest price for the sale—or likely some combination of the four.
At this first and vital stage of the process, advisors assist their clients in drilling down to the core expectations and reasoning behind their pending transaction. Together, we work to match a strategic plan to the client’s individualized objectives in terms of price range, types of buyers, timing and market conditions. Monitoring and assessing market conditions and developing a time table for action lays the foundation for what comes after.
Step 2: Preparation (Upfront Due Diligence)
Advisors and client perform a deep dive audit of all aspects of the company to identify strengths, weaknesses and value potential. This honest upfront assessment of the business will illuminate what buyers will be attracted to, what they may not like, and what questions will arise throughout the process.
A Confidential Information Memorandum (CIM) is created: a document consisting of marketing materials, business plan, key insight data, etc. At the same time, a Virtual Data Room is set up to contain all proprietary corporate records, financial statements, product information, employee handbook, etc. that interested buyers will want later in the process.
Advisors, assisted by the client, develop a buyer list and perform a deeper dive into why each company on the list should/would be interested in acquiring the client’s company. This will shape the initial outreach to potential buyers with an individualized message backed by metrics, strategy and business rationale for the acquisition. The list of potential buyers approved for contact is typically 30-50 parties. No potential buyers are contacted without our client’s approval.
Step 3: Managing the Sale Process
This step encapsulates much of the heavy lifting around communication between parties in the potential sale: contacting buyers, disseminating information, answering questions and setting initial and final bid dates. We call this the Dunn Rush 2-Step Competitive Sale Process.
Once the interested potential buyers have signed a non-disclosure agreement (NDA), received the CIM and have their questions answered, we would request they submit an Indication of Interest (IOI). This is Step 1. Each IOI would include the buyer’s thoughts on valuation, form of consideration, structure, timing to close and key areas of due diligence.
Dunn Rush collects the IOIs and evaluates options with the client, narrowing the field down to between 3-5 potential buyers who will then be asked to come in and attend Management Presentations. We would assist the client’s executive team in preparing for and orchestrating the in-person Management Presentations with potential buyers.
In Step 2, Dunn Rush would supply the selected potential buyers with any additional information they may want, and we would then request from each party a Letter of Intent (LOI). The LOI would have very detailed and specific information about the buyer’s offer and terms.
Final assessments of interested parties and their LOIs are conducted with the client. One or two finalists are selected, sometimes in a last effort to negotiate with each to increase price and improve terms. Finally, the client chooses a party to move toward a sale with and signs the LOI. The LOI grants the buyer an exclusive time period (60-90 days) to perform its due diligence.
Step 4: Due Diligence and Closing
Before a definitive agreement can be signed and the closing can occur, the selected buyer comes in to go over everything with a fine-toothed comb. It is at this point that the full contents of the Virtual Data Room, set up in Step 2, will be provided. The thoroughness of up-front due diligence and preparation will greatly expedite this process, as the buyer’s team which generally includes multiple outside advisors will ask incredibly detailed questions, review all the corporate records and financial statements, and monitor every minute detail very closely until the transaction closes.
Closing times can vary widely depending on how aggressive the buyer is with legal oversight, time constraints on their end, any issues that arise in due-diligence, and any possible requirements for regulatory approval. It is always in the seller’s best interest to see that the due diligence process moves quickly. There’s a saying in our business that “time is the enemy of all deals.”
From the first step to the last, experience is the key to saving time, heartache and frustration when selling your business. The more a seller can do in terms of up-front due-diligence and preparation, the greater chance of success they give themselves for the steps that follow.
At Dunn Rush & Co., we specialize in selling private, middle-market companies. We are heavily engaged right off the bat in developing a tailored transaction strategy that reflects a full understanding of the owner’s objectives, the company, the industry it competes in and the list of potential buyers, so the sale process, due-diligence and the push toward closing will proceed smoothly and efficiently.
What sets Dunn Rush & Co. apart from our competitors is that before joining our team, every one of our managing directors has been on the client side of selling a business as CEO, CTO, or CFO of a mid-market company that has gone through a sale transaction in your industry. Because of this, we are uniquely positioned to manage both the logistical and emotional process that our clients are going through, providing the insight and analysis you will need. This enables our advisory team to free the owner/operator from getting consumed by the process at the expense of the business itself—allowing our clients to remain focused on running their business throughout the process and maintain the solid financial performance necessary to get the optimal transaction over the goal line.
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What Clients Are Saying About Dunn Rush
I’ve known the Principals of Dunn Rush & Co., for a number of years and have had the opportunity to work with them in many different capacities. They’re true professionals, with deep experience in a wide range of transactions, across several industries. They are good people and I have always enjoyed working with them. You can trust them to provide top-quality advice no matter what your situation or circumstances.
Greg is one of the most effective investment bankers that I have had the opportunity to work with. His professionalism, ability to grasp the complexities of our business, expert advice and follow up insured that our process ran smoothly. Even when we hit road blocks during the process, Greg was there to offer alternative suggestions and to work behind the scenes with all parties to get the deal back on track. Greg was a real partner during the entire process from beginning to end and even though we were operating out of different cities, he was always available, day or night, to discuss and address the issue at hand.
I had never been involved in the sale of a business before, let alone my own. I hired Dunn Rush & Co. to assist me through the process because of their extensive experience in helping similar business owners. Kevin and Greg prepared us well for the task, anticipated events and issues, negotiated hard and delivered superb results. They know what they are doing and do it well!