When you sell a business you can experience many different paths depending on the complexity of the transaction. As a general rule, the process normally involves five different phases. Each of these phases can be generalized into the following five steps to help you as a business seller be more familiar with the process from the 10,000-foot view.
Preparation
During preparation, we work with you to determine what your business is worth on the open market taking strategic buyers and private equity into consideration.
Brokers’ Opinion of Value
The Brokers Opinion of Value (BOV) derives the “Most Probable Selling Price” of the business based on three different valuation methodologies. This approach is an objective process, using your business’s financial data, data from actual market transactions of comparable businesses, and statistically identified multipliers for determining business value.
The broker’s Opinion of Value is used to assist you in preparing your business for sale. Based on this BOV, we consult with you on how to position your business for sale in the market with a Sales Asking Price that will attract buyers and, at the same time, ensure no money is left on the table.
Listing Agreement
When you decide to put your business on the market, we ask you to sign a listing agreement, granting us the exclusive right to market and sell your business for at least one year.
Marketing
The first step is for us to collect all available information about your business and prepare the documents that will be used to market your business. Each sale is different and, as such, we tailor our marketing plan to our client’s business.
Blind Profile – The confidential profile (also called “blind profile”) is a snapshot of information that will be made available to any potential buyer. Information that is confidential, such as the name and location of your business and the name of the business owner, is not included in this blind profile. The confidential profile is used to broadly market your business through our management system and online.
Confidential Business Report (CBR) – The CBR is a comprehensive presentation given to interested buyers that meet certain criteria (see next page for details). We will prepare the CBR which becomes the primary tool for presenting the business to potential buyers. We will jointly review the CBR and you, the seller, will approve its content to ensure the document properly reflects the value proposition of your business.
Proactive Targeted Buyers Search – We will proactively look for potential strategic buyers. These are other businesses that might have an interest in acquiring yours to extend their footprint or service portfolio. As a business broker, we can approach any business with an acquisition opportunity while maintaining confidentiality for the seller.
Broad Buyer Search – We place the Confidential Profile onto the public marketing platforms that bring proven success in reaching potential buyers. If feasible, we also use print media advertising such as local newspapers, trade magazines, or other strategic publications. Such print media advertising may incur additional costs for the business owner, and we will only employ such strategies after discussion and approval by our clients.
Registered Buyers Search – The Bristol Group keeps a list of buyers that are actively looking for businesses to buy and have registered with us. Our list currently includes over 5000 contacts. These buyers will directly receive the Confidential Profile of your business for consideration.
Negotiation
Buyer Screening and Qualification – We spend an enormous amount of time sorting through the responses and inquiries from potential buyers who appear to be interested. Our job is to qualify buyers as to their financial strength and their commitment to maintaining confidentiality. All qualified buyers are, in turn, provided with a complete marketing prospectus – the Confidential Business Report – for their review. This sorting process may take months before we identify the serious candidates, which we will bring to you for an initial meeting.
Buyer and Seller Meeting – If the buyer and seller have a positive initial meeting and “connect” on the key expectations of both sides, the chances of the deal leading to satisfactory completion are greatly enhanced.
Letter of Intent (LOI) – We work with the prospective buyer in helping them to structure a formal written offer to purchase (LOI). We also orchestrate the process of having both the buyer and the seller reach an agreement on the price and terms of the transaction. The buyer submits this offer along with an earnest money check which is held in escrow until closing.
Due Diligence & Closing
This is the last step in selling your business and, as you might expect, the most critical. Now the buyer has to fully commit his future to take over your business.
During this phase, emotions are often running high. Your broker functions as a mediator to ensure molehills don’t turn into unsurpassable mountains, that the bigger picture doesn’t get out of focus and that you are closing the deal you really want.
Bristol Group will access our network of CPAs and legal advisors to ensure your transaction is structured in the best way possible for tax planning and legal documentation. We assist with reviewing closing documents and facilitating the closing of the transaction.
Due Diligence Process – We manage the process of due diligence, during which the buyer is given the opportunity to review all aspects of your business.
Drafting the Definite Agreement – The definitive agreement is drafted and reviewed by the parties’ Legal Advisors. This agreement is often called the Asset Purchase Agreement and includes standard representations and warranties of each party. The agreement may also include a bill of sale as well as the appropriate deeds for the real property being transferred.
Closing the Transaction – After the due diligence process (usually 15 to 30 days), we set a closing date through an escrow company or closing attorney. In closing the buyer and seller meet to review and sign all legal documents relevant to the transfer of ownership of your business. At closing, the buyer brings a cashier’s check for the balance of the down payment, and the seller pays the broker’s commission out of the proceeds dispersed by the closing attorney.
Buyer and seller will agree in the purchase agreement on a reasonable transition period during which the seller hands over operations to the new owner. This includes an introduction to key clients, employees, and business partners. In most cases, the buyer will request the seller will remain available after the transition on a consulting basis and for a fee. The duration of the transition period is subject to negotiation and it is up to the seller to agree to any of these terms.
Transition
In the purchase agreement, the buyer and seller will agree on a reasonable transition period during which the seller hands over operations to the new owner. This includes an introduction to key clients, employees, and business partners. In many cases, the buyer will request the seller remain available after the transition on a consulting basis and for a fee. The duration of the transition period is subject to negotiation and it is up to the seller to agree to any of these terms.
With the completed transition, the buyer has full ownership of the business and the seller can move on to the next phase of their life.