Knowing the steps involved in selling a business can save you time and effort in figuring everything out yourself. Of course, you can always approach an exit planning advisor such as us at ESL Advisors to get guidance about the selling process. However, if you are simply interested in knowing more about the acquisition process, for now, then keep reading.
This article will explain the process involved in an acquisition transaction to help any entrepreneur planning on selling their company. We will explain each step of the sale process in detail, so if you are planning a business sale, this resource will prove helpful for you.
Steps In The Business Selling Process
From the decision to sell your business to closing the deal, you have to pay close attention to each step of the process. While the business selling process may vary slightly for some companies, it is usually similar in most cases. Without further ado, here are some key steps involved in an acquisition as a seller:
Deciding To Sell: The first step to a business sale is choosing to put it up for purchase. There are several reasons why business owners or top leadership might put a business up for sale. The most common reasons why a business owner might decide to sell their business include the following:
Disputes among partners
Health issues of the owner
Inability to keep the business running
Planning a different business
Business Valuation: The next step in a business sale is finding out how much it is worth once the decision has been made. The process of determining a company's worth is known as valuation. Certified independent appraisers do valuation, and ESL Advisors can refer you to the right people to get an accurate valuation for your business.
Once you have the valuation, you can set an asking price for your business. Not to mention a formal valuation puts solid backing behind your asking price. So, your business sale process can't progress without getting a valuation.
Preparing Your Business: The preparation process starts after you have a realistic valuation for your business. A reputed advisory firm is essential during this selling process phase. The goal is to make your business attractive to potential buyers. An advisor can evaluate your current position and suggest improvements to improve profitability.
Compiling Paperwork: While a formal valuation is a great way to add credibility to the asking price, you still need financial statements to prove your business's worth. So during this stage of your business sale process, your exit planning advisor will help you compile and interpret your financial documents.
By carefully presenting the financial information, you can attract more qualified buyers who understand your company's profitability.
Identifying a suitable buyer: Once you have ensured your business operations are in order, you can start looking for potential buyers. Depending on your industry, finding the right buyer can take time and effort. ESL advisors have a database of qualified buyers and investors looking to acquire companies.
By working with an experienced advisor such as us, you can ensure you are matched with buyers who know your business's true potential. Qualified buyers are more likely to give you the best value for your business.
Negotiations: Once you have shortlisted a few suitable buyers with the help of an advisor, you can start negotiating the exit terms with the buyer. You can either negotiate with multiple prospective buyers at a time or focus on dealing with a single buyer at a time. Your advisor can help you pick the best negotiation approach and also work to protect your interest as a seller.
The negotiation phase in a business sale process also involves a lot of contracts that need to be signed. Most of these contracts are legally binding, so having an expert by your side is best to ensure you are legally secure when signing these contracts.
The negotiation phase will determine the acquisition deal's outcome, so involve ESL Advisors during this phase to protect your interests.
Deciding On The Transaction Structure: A business sale can be finalized in more than one way. And choosing the right structure for your business sale will depend on the preferences of both parties involved in the transaction. Generally, you can structure your company's sale as a stock sale, asset sale, or merger.
All these structures have specific pros and cons, and an advisor can help you pick the right structure that would benefit you the most.
Closing The Deal: Before you reach the final stage of the deal, you will need to sign several agreements, with an LOI (Letter Of Intent) being the most common. Once all the prerequisites are completed and both the buyer and seller find common grounds on the terms of the transaction listed in an LOI, they can then move to sign the purchase agreement.
Once the final purchase agreement is signed, it marks the finalization of the business sale. After this final stage, the seller may help the buyer with the transition process. However, all aspects of the deal, including financial ones, will have been completed with the signing of a purchase agreement.
It is rare for two business owners to face the same circumstances when selling. The sale process can vary based on a number of factors. And while the road to selling your business may seem bumpy, it can be simplified by involving a reputed advisor such as ESL Advisors. Not to mention having expert assistance available to you can increase the likelihood of a profitable business sale.
So now that you know the ins and outs of a business sale process, you are much more ready to initiate the sale.