The following guide is intended to give you an overview of how a business is sold and the type of documentation a corporate finance adviser prepares as part of the sale process. Let’s initially cover the sale process.
Stage 1: Appointment
The vendors appoint the corporate finance adviser. This involves agreeing fees and signing an engagement letter. Most advisers will insist on being mandated on an exclusive basis so that business is not marketed by several firms concurrently.
Stage 2: Preparation
During this stage, the adviser prepares the Teaser, the Information Memorandum (the “IM”) and the financial forecasts (the “Forecasts”). The adviser will send the vendors a comprehensive information request list, covering a wide range of topics in connection with the business for sale. Once the information is received, it will form the basis to prepare the draft documents mentioned above.
During stage 2 there will be a number of conference calls and meetings with the vendors and any senior management team members involved in the disposal process to discuss the information provided so the adviser will end up with a very thorough understanding of the business.
It should be pointed out that this is an iterative process and it can take several drafts until the documents and Forecasts are finalised.
In addition, the adviser will also research and agree a list of potential acquirers with the vendors, which will be approached in stage 3.
Stage 3: Marketing
The adviser will initially send the Teaser to the list of potential acquirers and follows these up to establish whether the opportunity is of interest.
Assuming there is sufficient interest, the adviser will send a Non-Disclosure Agreement (NDA), which the potential acquirer must sign and return. Upon receipt of the signed NDA, the adviser then releases the IM together with the Process Letter. The Process Letter includes a deadline to submit indicative offers for the Business.
It is often the case that potential acquirers will want to meet the vendors and senior management and request additional information beyond what is disclosed in the IM. The adviser will discuss the level of disclosure with the vendors. A key issue determining the level disclosure will be how serious the potential buyer is perceived to be.
Stage 4: Offers and Negotiation
Once the indicative offer deadlines has lapsed, the adviser discuss the offers with the vendors in detail and if necessary perform further analysis to substantiate a conclusion on these.
It is likely that the adviser will aim to negotiate with the various bidders to bid up the value for the vendors. Once the final, second round offers have been submitted, a single preferred bidder is typically chosen and Heads of Terms (the “HoTs”) are signed between both parties.
Stage 5: Exclusivity and Due Diligence
The HoTs typically give the potential acquirers an exclusivity period of 90 – 120 days to complete the financial, legal and commercial due diligence and conclude the transaction. The lawyers also start drafting the Sale and Purchase Agreement (the “SPA”).
There are likely to be further negotiations around the findings of the various due diligence processes and reports.
Stage 6: Completion
Assuming the both parties can agree on a deal and overcome any issues highlighted in the due diligence process, the deal can conclude with the SPA and all other legal documents being finalised and signed.
Specialist Accounting Solutions Ltd offers a corporate finance advisory service to business owners. If you would like a confidential discussion with us about your business please email sean@teamsas.co.uk or call 0118 911 377.
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