Sell-Side Advisory

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Sell-Side Advisory

For nearly forty years, DCF professionals have advised and assisted business owners wishing to sell their companies. For the majority of owners, this is a once-in-a-lifetime event, so it is important to leave as little as possible to chance. Executing a well-devised plan is critical to maximizing the ultimate proceeds from the sale of the business. Based on our experience with over $17 billion in middle-market transactions, we honed our three phase process in order to:

    • Maximize sale proceeds and benefits to the current shareholders,
    • Increase the likelihood of closing the transaction, and
    • Minimize time to closing and disruption of operations.

Phase One
Valuation

The foundation on which the sell-side process rests is a solid understanding of the company's value. The valuation process begins with a request for information about the business, followed by a detailed interview designed to provide information about the company's history, management team, ownership, products and services, markets, customers, competition, suppliers, facilities, manufacturing processes and capacity, capital structure, contracts and licenses, as well as current and expected trends, along with issues in the industry and the economy. Once we have an understanding of how the business works, we analyze historical and prospective financial statements.

At the core of our service, we are experts in business valuation. The valuation provides the opportunity for frank discussion with the owners regarding the value of the business, including areas of financial or operational concern to potential buyers.


Phase Two
Preparation for sale

This phase includes research to determine the most probable buyers for the company. Once potential buyers are identified, we prepare a Confidential Information Memorandum (CIM) that explains the investment opportunity. The CIM is based in part on the information gathered in performing the business valuation. The CIM is a marketing document designed to summarize important information about the business in order to limit negative surprises during the due diligence process.


Phase Three
Selling the Company

The third phase involves conducting a controlled marketing process for the company, analyzing and comparing competing offers, hosting buyer due diligence, and closing the deal.

Based on the number and quality of the Indications of Interest (IOIs) received as well as follow-up inquiries, negotiations will begin with selected potential buyers in order to determine one or more interested parties that may be invited to the data room and to engage in management interviews. The goal of the process will be:

  • To narrow the list of interested parties to only those that have the ability to close and to do so promptly,
  • To ensure the seller understands the IOI terms, and
  • To assure that these terms will ultimately be transferred appropriately to a Letter of Intent (LOI).

The two or three potential buyers (finalists) who have submitted the best LOIs are invited to conduct due diligence, which takes place in the data room - a physical room either off site or a virtual room accessed electronically. Many potential transactions have fallen apart due to poorly prepared data rooms or due to data that conflicted with the CIM. By properly organizing the data in Phase One, this risk is substantially reduced.

On completion of due diligence, a single LOI is negotiated with the finalist. The LOI resembles a written contract, but is not completely binding. The portions of the LOI that are binding include such items as non-disclosure agreements, a covenant to negotiate in good faith, or a "stand-still" or "no-shop" provision promising exclusive rights to negotiate. The LOI's negotiations ultimately drive both sides toward closing.

Closing involves the selling company's attorney, as well as a specialized transaction attorney hired specifically for this process. Of course, the selling company's accountants will play a crucial role throughout this process.

Phase Three can take up to four months, as it is not unusual that the selected potential buyer will want between 45 and 60 days to close. As a rule of thumb, we tell our clients to be prepared for a nine month process in total - Phase One through closing. Of course, timing can vary either way.

Selling a business requires a disciplined process executed by experienced people. DCF professionals have been involved in assisting clients buy and sell hundreds of businesses. We believe there is no substitute for our expertise in valuing businesses, our understanding of both sellers and buyers needs, our experience assisting with financing, and our adherence to a disciplined process. To discuss the potential sale of a business in confidence, please give us a call.


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