Now that you’ve primed your company to be sold and hired the right professionals (brokers, lawyers, advisors, accountants), all you have to do is to put your business on the market and wait for the offers to flood in, right? I wish that was true, but unfortunately it’s not quite that simple. Marketing your business for sale is far more complicated than selling another large asset, such as a house. It involves analyzing all the elements that might make it attractive to various types of acquirers, gaining their interest (while at the same time working out if they’re someone you want to sell to) and managing the relationships so you negotiate the best offers. All while keeping the process confidential.
There’s a lot to do, but the good news is that most of it is your broker’s job. If you’re thinking you can save money by doing it alone, my suggestion is to pause for a moment and consider the opportunity cost. I’ve often helped clients buy companies whose owners didn’t have professional support. I’m pretty sure that not only did the sellers leave value on the table, but if they’d enlisted a broker, it would have paid for itself many times over. With 65% of businesses on the market failing to sell, it makes sense to use professional expertise available to you.
With the benefits of enlisting a good broker in mind, it’s worth understanding what they do to sell a business. This is so that you can support them and give them the time they need to carry out their work. The marketing of a business for sale falls into two phases – preparation and going to market – each of which has its own set of tasks.
Preparation
There are some preparatory steps that a successful marketing campaign needs to go through before your business is formally taken to market. The purpose of this is to ensure the sale runs smoothly and there’s minimal opportunity for your future buyer to negotiate the price downwards down the line. It involves a great deal of planning and analysis, but the work carried out now will pay dividends later in both time and money.
Now, before you can look outward at marketing your business, you must have analyzed your company’s financial and legal situation. Completing tasks such as creating a detailed financial forecast with your broker (to demonstrate future performance and investment returns), conducting a thorough legal audit (to prevent delays or price reductions during buyer due diligence), and undertaking a tax audit (to give buyers confidence and avoiding costly negotiations). Only once you have completed these tasks, would I recommend embarking on the three steps needed to market your business for sale successfully.
Step 1: The potential buyer long-list
In this stage, you need to explore who’s in the market to acquire your business. Your broker should create a long-list of potential buyers that includes everyone who could possibly be interested in it, with the aim of narrowing it down later. To do this, they extensively research relevant companies, private equity firms and individual investors, and evaluate them based on their strategic goals. Are they actively looking to grow through acquisition? Would your business be a good strategic fit for them? Do they have the financial firepower to make a deal of this size, or are they too small or already overstretched? The broker will also review their track record in terms of acquisitions they’ve made in the past. Are they experienced in buying companies, and would they be a helpful partner on the selling journey?
At the end of this process, your broker has a long-list of qualified potential buyers who might be interested in, and capable of, acquiring your company. But that doesn’t mean you would necessarily want them to approach the whole list. There may be customers or suppliers on there or other businesses that you wouldn’t want to learn your company is up for sale. There might also be a business or two that you’d feel unhappy about entrusting your employees to. It’s always your decision, which is why your broker reviews the list with you to gain your approval and make adjustments as necessary.
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Step 2: The information memorandum
This is a comprehensive document that ultimately gives interested parties from the long-list of potential buyers the detailed information they need to decide whether they’re interested in making an offer (subject to due diligence) to buy your business. To create it, your broker uses the information from your financial, legal and tax audits and data on your market position and future growth opportunities to make it as compelling as possible. They want anyone who reads it to see your company as a tempting acquisition opportunity, and this involves working with copywriters and designers to create an impactful communication piece. Your broker can, and often will, tailor it to appeal to different types of buyers.
Step 3: The teaser document
However attractive your broker makes your business look in the information memorandum, there’s no getting away from the fact that it’s a long document and it will be hard work for a busy entrepreneur to read on spec. What’s more, you probably don’t want your entire long-list of potential buyers to know that your company is up for sale. It’s better only to reveal your identity to those who are seriously interested. That’s why your broker extracts the most salient points from the memorandum into a teaser document (sometimes called an executive summary). This is an anonymized synopsis of your business sale opportunity which is designed to pique the interest of potential acquirers. Although it’s created after the memorandum, it’s sent out beforehand as the first step in the “go to market” phase.
Overall, thorough preparation at every stage of the business is the foundation of any successful business sale. Taking the time to work with your broker to identify the right potential buyers, present them with a strong information memorandum, and spark their interest with a well-crafted teaser document will ensure that you attract serious offers and protect the value of your company.
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