So, you’re ready to sell your company – and if you did your homework, you don’t have any prior engagements holding you back. Where do you start?
Back in May, we introduced you to the three phases of selling your company: development, marketing and closing. Given that it was the height of wedding season, a marriage analogy seemed appropriate. We’ve decided to take that comparison and run with it: Our next few posts will devote an in-depth discussion to each phase. For purposes of this mini-series, feel free to think of us as your FourBridges Relationship Advisors. (If this goes well, we’ll consider adding “Bridge to Marriage” to our list of services.)
Once an owner decides it’s time to sell, there is a tendency to be over-eager to close the deal. Despite our love of cake and champagne, we’re here to remind you not to rush down the aisle. If your ultimate goal is to achieve maximum value for your company, it’s necessary to start with the development phase. Think of it this way: You wouldn’t leave the house for a hot date without first taking a look in the mirror.
To make a strong – and honest – first impression with your potential buyers, you need to know your company inside and out. The development phase is the time to perform your due diligence, recognizing the strengths and weaknesses of your company, as well as any skeletons that may be lurking in the closet(s)…e.g., rights of first refusal or lingering worker’s comp claims. Additionally, you’ll need to dig into your financials to identify any questions or discrepancies that could cause buyers to hit the pause button. This is also the time to brush up on what’s happening in your industry as a whole. Where has it been, where is it headed and how is your company positioned to benefit? Is the competition increasing? Are there emerging opportunities? Has the technology changed?
The information will be organized into a Confidential Information Memorandum, or CIM, and presented to potential buyers during the marketing phase. The CIM will help you to project an image that is professional, straightforward and polished. There is no standard template for a CIM, but generally, it should include an overview of your company, your financials (historic, current and projected) and your industry. In addition to highlighting strengths and important investment considerations, the CIM should address any questions that might come up during discussions with a buyer.
Once the CIM is complete, you’re ready to market your company and meet your potential buyers. It’s like hitting the dating scene, minus the sweaty palms and awkward handshakes – no need for any pre-date jitters here. If you thoughtfully and thoroughly completed the development phase, the marketing phase has potential to be a piece of (wedding) cake.
In our next post, we’ll give you an idea of what to expect during Phase II. Stay tuned!