Taking Your Business to Market

Whether on your own or with an adviser, finding the right buyer requires planning, negotiation, and flexibility.
Putting your company on the market should not be taken lightly. The process involves many steps and requires a well thought-out plan. Unlike real estate or the stock market, there is no single listing of businesses for sale. So, how do you reach potential buyers without the whole world, especially competitors and customers, knowing that your company is for sale? How do you set yourself up for effective negotiations? How do you present your business effectively?

The best way to reach buyers, and to do so confidentially, is to hire an expert. The type of expert that will be best for you will depend on the type and size of the company you are selling. Companies with less than $5 million in sales, such as smaller manufacturing, service, food or retail establishments, will probably be best served by a business broker who will provide access to buyers and keep things confidential. The broker will also document the negotiation the transaction and advise you all the way through closing.

No matter what type of expert you choose, they should have access to the numerous venues and marketplaces to connect with buyers. Some are public and others are for the experts only. In addition, a good adviser should have contacts in your industry and have the ability to leverage their network to reach buyers that might not otherwise be accessible through the market venues.

Your adviser should also have the means to effectively profile companies, private-equity groups, and investors that would be a good fit for your firm, and reach out to them directly. Most seasoned advisers will have direct access to these, as well as an internally cultivated database of buyers.



Presenting to Buyers

A good firm will engage buyers first on an anonymous basis, often using a concise and anonymous profile to gain their interest. Be sure to review your profile to ensure it is truly anonymous. Here are a few more useful tips:

After the buyer has been screened by your adviser -- and a Confidentiality Agreement has been signed, the buyer will typically then be presented with a Summary Report on the company, sometimes called a confidential memorandum, information memorandum, or similar. This is effectively the "presentation" on your business and should be a substantial document.

Some of the areas that should be covered include:

• A thorough executive summary
• Summary of products and services
• Overview of the customer base, contracts, vendors and partners
• Bios of key management that will stay post-acquisition
• Org chart and personnel overviews
• Detailed adjusted financial statements (not just summaries)

Engaging the Buyer

After your broker has courted the buyer anonymously, signed confidentiality agreements, presented the Report on your business, and answered initial questions, the next step is often a direct meeting with the Seller and prospective buyer. This is where the relationship building begins and the buyer can really buy-in to the value of your business. This is also not the time for negotiations. That only comes about after an offer is presented.

Preparing for the Offer

It is common at this stage for a buyer to make an offer or pass. As you begin to consider offers, be flexible; there are dozens of potential deal structures and the right one will vary from buyer to buyer. Remaining flexible and maneuverable is one of the keys to getting the best deal possible.
Hiring the right broker to advise you through this process is one of the most important decisions that you will make in this process. A good advisor, one not only with experience, but with the skill to bring about the best results for you.