The Five Stage Selling Process - 20th Mar 2017

By: Roger Cameron

There are 5 Key stages to selling a business:

1. Producing a “Robust” Business Plan – a below par plan will result in failure or sub-optimal value.
2. Undertake Thorough Research to Identify Key Targets & Meet with agreed Targets – to maintain confidentiality, it is strongly recommended that external advisers are used.
3. Check out potential Buyers – many documents will be exchanged and “Heads of Agreement” will be reached with a buyer. This will be supported by due diligence – a two-way process!
4. Do the Deal – normally there will be final negotiations post due diligence, following which the  contract is produced by the legal team – It is critical that Due Diligence does not uncover major surprises!
5. Completion – still a lot more work to be done to ensure agreement reflects the commercial understanding. – Advisers support is required throughout such that the ongoing business can survive!

Every sale is different but must be based on clearly defined objectives

Stage 1 - Producing a “Robust” Business Plan

Absence of a plan which does not stand up to scrutiny will result in failure.

The Business Plan is the source document used to present the Information Memorandum (IM) and the “Teaser.”  The “Teaser” is a brief (1-2 page) summary of the opportunity.

All “interested” buyers will eventually review the Company’s Business Plan to determine past performance. future growth; management capabilities; strategic fit and ultimately value.

Key elements to include in the Business Plan are;

• Full review of the industry and market data; both historically and projected.
• Customer base and historical performance.
• Business Ownership, company structure plus management and key staff profiles.
• Company differentiators – what are the areas of strengths, uniqueness
• i.e. added value!
• Financial Profiles – (typically) 3 years historical and projected.

Stage 2 - Undertake Thorough Research to Identify Targets & Meetings with agreed Targets

One of the most critical aspects of the sale process. Needed to protect “ongoing” business & staff retention!

Many companies fail to realise the risks. Utilisation of Baird Partners minimises these risks.

• Complete full and thorough research to identify a “long-list” of potential buyers.
• Subsequent analysis undertaken to determine potential targets. (We have access to financial and specialised databases).
• Identification of a strategic partner (buyer) is key to optimising value.
• Target list agreed. We approach each confidentially – critical to protection of both existing business and staff!
• If interested; we meet with each target.

Stage 3 - Check out potential buyers

During this phase “Due Diligence” is undertaken whereby both entities are fully reviewed.

• Frequently, possible “buyers” are your competitors. It is hence critical that we have assessed the credibility of a potential buyer before they are aware that it is your business “for sale”.
• Although appearing to be suitable buyers, subsequent “follow up” often reveals that they do not have the financial muscle and/or appetite to acquire. 
• It is only after a full evaluation and a positive outcome, that a potential buyer is identified and agreed.
• Many documents will be exchanged leading to a “Heads of Agreement”  being reached with a buyer. This is not a binding contract.
• Due diligence follows which is a two-way process!

Stage 4 - Do the Deal

It is essential that integrity is maintained throughout as misleading or withheld information will be uncovered during “due diligence”!

Further negotiations are frequently undertaken following “Due Diligence”

Typically this will cover staff; customer contracts and reserves for “unknowns”

The final contract is produced by the legal team for signature and exchange.

Stage 5 - Completion

Be aware of and avoid unnecessary minor issues becoming major obstacles.

• It is key to ensure that the contract reflects the intended and “agreed” commercial elements.
• A key aspect of the legal process is the negotiation of the warranties and indemnities.

The sale process is sometimes long and complex and hence advisers are normally required /used to run the process, such that the core business can continue to function.

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