If you’ve ever tried to sell something in your life then you know how it can be quite annoying and difficult. Now, imagine how hard it must be to sell a big company. It is a long, extensive process, and before one considers selling a large business, it is important to be aware of the steps to take and everything that has to be done properly. There are many important facets that need to be taken into consideration when selling a company, as it can take years. Keep reading for five facts about selling a large business.
There are two types of buyers.
There are two categories of buyers when it comes to selling a large business, and they are strategic buyers and financial buyers. Both are equally important, and each has positive and negative aspects. A business’s mergers and acquisition (M&A) banker should work with them to be aware of the different aspects of selling their business. Among these include various strategic goals, selling requirements and expectations for the company’s value.
It can take up to a year to begin selling a large business.
Before a company is sold, their advisory firm may make oversee their financial and strategic conditions to determine how it can become more sought-after. This process may take six to 12 months to plan. Any strategy plan changes are typically not extensive, as that requires a lot of time, and it can tend to be high-risk. The changes should be substantial enough so that the business becomes more desirable to potential buyers in a short period. It’s not wise to jump the gun and sell a large business off the bat, and any experienced bankers will be able to help business owners with this mindset.
Not every interested buyer will be qualified.
Not every buyer that shows interest in purchasing a large business will have the credentials or qualifications to buy it. The company’s banker should thoroughly go through each interested buyer before too much time is wasted with the interested buyer and the company. There is a risk of confidentiality if important information about the company gets into the wrong hands, so it is crucial that buyers are weeded out accordingly before advancing in the purchasing process.
Negotiating with multiple buyers is less high-risk.
When selling a large business, business owners are sometimes advised to negotiate with one buyer who is very sought-after and wanted. However, this is an incredibly risky action to take, – but if it works out, can be advantageous. Most of the time, large businesses pick and choose from various, eligible buyers, which is less high-risk than negotiating with just one. Any kind of competition that occurs amongst buyers in the process of selling a large business must be gone about in a professional and considerate manner.
Companies are typically bought in three stages.
There are three important documents that are recognized as stages when selling a large business. These are the IOI, LOI and the Purchase Agreement. The IOI – Indications of Interest – lays out proposed terms, transaction structure, and valuation of the business. It is non-binding, and it serves as an indication to a large business owner if they should bring in the potential buyer to learn more about the company, and maybe even become serious in buying it.
After IOIs come Letters of Intent, or LOIs. They serve as a legitimate indication of interest from the buyer to buy the company. At the point of LOIs, the business owner (the seller) and the buyer are both under exclusivity, and the seller cannot meet with other potential buyers during this timeframe. This timeframe of exclusivity is when the buyer decides they want to move forward in the buying process. The final step/document is the purchase agreement, which entails the most specific details needed to sell a large business. These include any financial and legal facets, warranties, and representations. It is the official document for sale.
If you are ever trying to sell a large business, don’t maneuver its complications alone or without trusted and experienced legal counsel. The Berman Law Group and its dedicated corporate law and business law attorneys are here to help you. Call us today at (800) 883-5206 for a free consultation.