Money Games: Sell Your Company Now

9 Conduct Management Presentations

A small subset of the buyers who receive your IM may ask for a management presentation. They want to decide whether your management team is credible, and to get a better understanding of the business beyond the IM. At management presentations, you need to know every fact there is to know about your business and its market, as nothing impresses a buyer like a management team with all the relevant facts at its fingertips.

If you don't know the answer to a question, say so and undertake to get back to them with an answer shortly after the meeting. Never make anything up, and never try to skirt around answering a question directly. You will usually need to go to the buyer's office for the meeting, but occasionally the buyer will come to your offices to kick the tyres. You may meet several times before moving to the next stage in the process.

As part of most buyers' review processes, people beyond those you meet are likely to review your documentation, product and so on. Try to find out who they are, and ask if you can also meet with them directly. Many discussions fall over at this early stage because someone you have never met comes up with a reason not to proceed with you, and you have no chance to prevent it if you don't get yourself in front of them. Never underestimate the complete consensus many firms require to make an acquisition decision.

10 Receipt of an Indicative Offer from Buyers

A small subset of the investors you meet may make a non-binding indicative offer to buy your company for a specific amount, subject to due diligence. The offer is likely to be short and to the point, with detail about the structure of the offer likely to come as part of any final binding offer you might receive. Make sure that buyers describe the basis for their valuation, so that if they try to renegotiate their final binding offer there should be something specific discovered during due diligence which has changed their views on the business.

You should require details on how the buyer intends to fund the transaction, particularly where the transaction will be funded with a mixture of debt and equity. Given the collective decision making process for most acquisition decisions, ask buyers to outline their internal decision making process to date and going forward to completion.

11 Selection of the Potential Buyer

If you have more than one indicative offer, you must decide which you think best meets your needs. This decision should always be a balance between financial and non-financial considerations, including:

• Total price
• Cash on closing
• Earn out (see Final Offer below)
• Equity roll over (see Final Offer below)
• Culture

You may want to spend some time with potential buyers outside the formal process, as you may discover things over a meal or a drink which are not apparent in the formal environment of a management meeting. However, be wary of showing your own hand in a more informal setting, as they will still be very much in evaluation and negotiation mode at this stage.

12 Exclusivity and Due Diligence

Once you have selected the buyer, they are likely to want to enter into an exclusivity period with you to conduct due diligence. This means that they are the only potential buyer to whom you can sell the business during the exclusivity period, which should be a month or so depending on the complexity of your business.

If your data room is complete and detailed, this should make it easier for everyone during the due diligence period. It is likely that buyers will ask many additional questions, so you may need to do additional analysis to supplement the data room.

13 Prepare and Negotiate Sale and Purchase Agreement

This is the document used to transfer shares to the buyer, and is best prepared by a lawyer familiar with mergers and acquisitions. This work should be done in parallel with due diligence, and if possible you should try to get your own lawyer to control the process to safeguard your interests. Your lawyer should explain what goes in the document, but it should cover:

• Price per share
• Number of shares sold
• Representations and warranties
• Covenants
• Conditions for closing the deal
• Any side agreements with the buyer