Selling a business goes through a series of well-defined steps. A bit of google research and you will find these listed on several sites like Investopedia and others. A business decision to sell is triggered largely due to the following reasons:
- Cashing out and booking profits
- Distress sale
- Family reasons or internal disputes with the ownership group
Selling a business to cash out and book profits is a business tactic adopted by serial entrepreneurs. The entrepreneurs decide to sell when they have achieved their financial goals set by them. Serial entrepreneurs try to cash out when the price is highest, market conditions are favorable, and demand for the goods and services of their company is high.
Identifying a buyer, irrespective of the reasons for a sale is quite a tedious and time-consuming process. Most entrepreneurs therefore use brokers to identify buyers. I suggest you create an Information Memorandum (IM) document to give buyers a comprehensive view of the company.
I look at IMs regularly for an M&A funding coalition. Each pitch is different both in structure and content. Generically speaking, selling a company information memorandum document should contain the following information;
- Overview of the company: It should contain the date of incorporation and a historical snapshot of its performance since its inception. It is best to include quantitative and qualitative information regarding your company.
- Offerings: The products and services your company sells should be clearly outlined. Kindly include details of the best-performing product and service. Include the comparative share of this product or service in the company’s overall revenue. The section should contain a summary of the product features.
- Reasons for sale: A buyer will want to know why the asset is being sold. It is important to provide detailed information here.
- Financial Snapshot: The company’s assets and liabilities overview is important information that should be included in the IM. I am not recommending that should share the full balance sheet, but a summary and highlights of the company’s financials are necessary.
- Ownership details: Buyers are always interested in information on the ownership details of the company. If it is a Founder owned corporation, include the resume summary of the owner.
The estimated sale value of the company depends on the enterprise’s perceived value in the eyes of the buyer. The business need of both buyers and sellers drives the selling a company process.
Transaction advisers are appointed to drive the process if the asset is large. Transaction advisory firms help by preparing IMs and showcasing the asset’s value in road shows and one-on-one conversations with prospective buyers.