Buying a company or selling a company is a major undertaking for all involved, including owners, shareholders, management, employees, and all other stakeholders. It is intense, time-consuming and can be costly if not done well. Additionally, it can take months or longer depending on the size of the transaction.
To ensure maximization of value and key objectives being met on the sell side, an investment bank and its team of trained professionals is retained. An investment bank is can also be retained to help you get the best deal and in meeting your key objectives on the buy side. This team will provide comprehensive financial analysis of both the company and/or targets, determine optimal estimated valuation range, prepare all materials needed during the buy/sell period, and oversee the interaction with the seller/buyer on the other side of the deal. The goal is to achieve an optimal mix of hitting key objectives, terms, speed of execution, and certainty of completion on all aspects of the deal.
In general, the process will go through four stages. Each has a specific purpose and end game. All of them line up to achieve the main goal of buying/selling. To be very clear, whomever you choose to help you buy or sell, make sure they have a systematic, well managed, machine-like process that has been proven over time, industry, size, and market. Without such a process, something will be missed and that can be very costly both in time and money!
Part 4: Seal the Deal (1-2 months)
Negotiations: Once the recommended list of prospects has been reduced sufficiently, your investment bank team will negotiate with the finalists. Having more than one finalist can create an auction mentality which will add value for you in a sell deal. Your team also will be able to handle any remaining due diligence items and set final terms. These final negotiations are used to differentiate all bidders such that one is a clear winner.
Final Due Diligence: Once a winner has been chosen, final negotiations proceed. All details of the deal are agreed upon and documented in a definitive agreement (DA). All approval parties have been notified and have given consent. Final representation and warranties are nailed down in what is termed bring-down due diligence. These are heavily negotiated items as all items are “brought down” to the table to finalize.
Financing/Closing: Being worked at the same time as the final due diligence is the financing of the deal. The buyer takes steps to source and fund the needed/agreed to capital to close the deal. Once the definitive agreement has been executed and the funds are exchanged, the deal is closed.
Other available topics
- What will it cost me to buy or sell a company?
- Three winning preliminary steps in buying or selling a company.
- Five questions you must ask your investment banker/advisor.
- What’s the difference between M&A advisors, business brokers, and investment banks?
- What is the “process” for buying/selling a business?