WHAT TO EXPECT WHEN A BUYER COMES CALLING
It can be exciting when someone is interested in buying your business. Acquisitions, however, can be exhausting and confusing. You might not know what a buyer wants, or what they expect from the process. While every business sale process is different, here are a few basics you should expect when an acquirer seeks out your business:
The Introduction Process
After the initial connection, a buyer will want to talk on the phone to gauge your interest and assess whether the companies are a good fit for one another. This is akin to an initial phone screen when you interview for a job. Use it to feel the buyer out, and to assess how serious you each are about the deal.
Face to Face and First Information
If that first phone call proves promising, then the next step is a face to face meeting. The buyer may only be interested in researching you for later, not acquiring you now, so it’s important to assess how serious they are, and what their timeline is.
It’s helpful to have a pitch deck and other data, including engagement metrics, monthly recurring revenue, and financials from the last few quarters. Buyers want reliable data, and the more you can offer, the better.
Setting Expectations
You can set clear expectations for how any potential deal may proceed with an open discussion. Eventually, this discussion should form the basis of a clearly worded letter of intent (LOI), written with the assistance of an experienced investment banker or M&A advisor. Think about some of the following:
- What do you expect from this sale? Will the team stay together? What about your involvement after the sale?
- How do you feel about the buyer radically changing your business or product after the sale?
- How long can you remain present after the sale?
- What about cultural fit issues?
- What is the primary motive for selling your business?
Once these factors, price, and deal structure, are hammered out to an acceptable range, it’s time to memorialize this agreement in an LOI.
Team Interviews
If expectations look similar, you can expect that the buyer will want to spend a few weeks meeting with and interviewing key team members. They may ask to talk to specific people or ask you to suggest the right people. This approach allows a buyer to assess the technical skill of your team, determine who must stay on board, and assess subjective issues like a cultural fit. Talk openly with your team about these questions, and advise them that they may include technical questions that could affect their long-term employment.
Due Diligence and Execution
If all goes well with the interviews, you can move on to due diligence. As long as everything checks out under due diligence, the deal will go forward. But be warned: due diligence is a complex process that requires its own planning. It’s far beyond the scope of this article and typically requires expert advice and insight. That is why it is strongly recommended to seek out the help of an experienced and trusted boutique investment banking firm.
Deal Closing
Closing is the final hurdle to completing the deal. You’ll negotiate key terms after due diligence, then agree to a final closing date. Thereafter, integration begins in earnest. But don’t be fooled: integration is an ongoing process. For the deal to truly succeed, you and the buyer must begin planning for seamless integration from day one.
This is a highly general overview of the business sale process. Some business sales take much longer and have significant additional steps. Sometimes it’s two steps forward and three steps back. And sometimes you have to start over with a new buyer. Seek skilled, expert insight for a better idea of what you can expect from the process, such as the professional team at Cornerstone.