When selling your business, it is important to have "your ducks in a row". You need to know your business down to the smallest detail, as buyers will want to know EVERYTHING about the product before they pay the price and transfer the money to you. Some business owners make the mistake of wanting to do the sales work themselves or partially themselves, as they believe they know their own business better than anyone else. They probably do, at least initially. But they do not know the sales process, the pitfalls, all the buyers, and the path to the best result. Other things being equal, people who have these areas as their core competencies will have better opportunities to safely guide you through the process than if you do it yourself. Advisors may seem expensive at first, but if they can help you achieve a higher price, a larger buyer pool, greater competition, better contracts and terms, you will find that the money is well spent in the end. In the podcast, the panel will discuss their own experiences, share their expensive lessons learned, so hopefully you can avoid making the same mistakes.
The M&A advisors / business brokers manage the process from start to finish. First, they need to get to know you and your business. They need to go through everything. They ask about your products, your organization, your competitors, your customers, your finances, your future plans, your strategy, etc. They go through everything and identify the gaps. Many founders have the strategy in their heads, but the corporate finance advisor helps you put it into a presentation that can be explained to a potential buyer. When the advisors understand your business thoroughly, they will work with you to prepare the presentation material and a process plan with all the milestones you need to go through, from identifying potential buyers to handing over the keys to the business. As presentation material, the advisors will first prepare a so-called "Teaser" which is sent out to a select group of both financial and industrial buyers. Often in anonymized form, so that the market cannot immediately identify you or your company. After the teaser, an IM (Information Memorandum / Information Material) is prepared, which really goes into depth with your business. The IM is sent to the potential buyers who have signed an NDA, indicating that they are genuinely interested in investigating the business further.
The lawyers often enter the process when the actual interested buyers are identified via the teaser. The lawyer prepares and sends out an NDA (non-disclosure agreement), and keeps track of them coming back in a signed form, or if they need to be adjusted. Next time we meet the lawyer is when the LOI is being negotiated or when a data room needs to be created for use during due diligence. In a data room, all relevant documents are stored, ranging from the company's articles of association and registration certificate, customer contracts (often with sensitive information such as customer names redacted), employee contracts, financial statements, board minutes, etc. This material is made available by the seller to the buyer in a virtual data room. In this room, the buyer and seller can ask and answer questions of each other, and all the material will then be used as documentation in the transaction. The lawyer prepares an SPA (share purchase agreement), which the lawyer negotiates with the counterparty's lawyer, and handles the formalities for both "Signing" (signing of the agreement) and "Closing" (when ownership officially transfers to the buyer). Payment of the purchase price is also often made to the lawyer's client account and transferred to the seller only when all the agreed points in the "Closing Memorandum" have been completed
The accountant's job is to prepare all the financial material based on which the purchase price can be calculated. The valuation is often based on a multiple, which is multiplied by either the top line (revenue) or EBITDA or EBIT. This is also called "Enterprise Value". If you were to explain Enterprise Value, you could compare it to buying a house. Enterprise Value is what the house is put up for sale for, while Equity Value is what the buyer ultimately pays less the debt. The accountant also calculates "Working Capital," which is the capital required in the company to maintain daily operations. It is the money tied up in debtors, creditors, and possibly inventory, which is the amount you need at a minimum to run the business. The working capital can vary during the year. Sometimes you may have received payments from all customers, and liquidity can be very good, while at other times, all your money may be tied up in your inventory, waiting for customers to pay their bills. In a business sale, the average of the last 12 or 24 months of working capital is often calculated, and then it is determined whether there is too much or too little "cash in the bank" at the time of the business transfer. This means that adjustments need to be made to the purchase price.