Most clients don’t believe when we tell them, they will be the largest factor as it relates to how long it takes to sell their business. Obviously, the market influences transaction timing, but for most deals, it is the availability of information, owners, and stores for inspection that drive the duration of the transaction. If you want to the transaction to move more quickly there are steps that you can take:
- Confidential Information Memorandum (CIM) Preparation
- The CIM is effectively the sales document we use to market the company. It will cover the company history, financial history, management team, strengths and weaknesses of the company, opportunities for the company, details regarding each store (location, size, equipment, condition, etc), store by store performance data, etc.
- The more of this information you have available prior to engaging an investment bank, the faster the CIM drafting process. We provide clients with a list of requests. We have had clients provide us with all the information we need in a few days, and another provide us with all the information after 9 months. We can’t get started marketing the company until after this document is prepared, and that delay directly translates to a longer process.
- Availability of the Owners and Management
- Inevitably we can’t answer every question in our CIM. Undoubtedly, we will receive questions from potential buyers. The faster we get the questions answered, the higher the likelihood we can maintain transaction momentum and speed up the process.
- Post indications of interest (IOI), we will schedule management / ownership meetings. We try to limit the number of these meetings so as not to be disruptive, but ultimately the availability of management / ownership will dictate how quickly we can move through this portion of the process.
- Due Diligence
- The due diligence process requires a substantial investment of time from management / ownership. We help our sellers by providing a list of data requests that we expect to be requested from a buyer during the due diligence process. Compiling that information (for example the organizational documents, tax returns, complete and accurate asset lists, etc.) takes time. The due diligence process duration can vary wildly based on how prepared the seller is, the quality of the materials, and how much time management / ownership can dedicate to pulling together the information / answering questions.
The difference between a well-prepared seller and one that has not prepared or does not have the time to dedicate to the sale process can be measured in months. We have sold businesses in as little as 3 months, and as long as two years. Our process for those deals was not different. The difference was almost entirely based on our client. For most of our clients, this is the largest transaction of their lives. Going as quickly as possible is not one of our goals (unless it is one of our client’s goals). That said, a well-prepared client usually transacts at a higher value, even if it doesn’t impact transaction timing.
For more information regarding the process, please feel free to shoot us an email or call.