Selling a business is analogous to getting married.
First, you have to meet someone, next there is the courtship, then, hopefully, you fall in love; and only when and if the pair agree to unite, it is at that point that the big day is planned.
How long does it take?
There is the typical timing, and then there are plenty of exceptions! When selling a business, a realistic time frame is anywhere from 6 to 18 months.
Not included in the above period is the time needed to prepare the business for the sale. Issues such as the dependency of the business on the shareholders, the accuracy of the company’s financial statements, its financial performance, current value and expected performance need to be addressed. A seller needs to be personally ready for the sale process and must make sure that the business is in the shape required to attract suitors willing to offer an acceptable price.
Often the business is not ready to sell “as is”; seldom is the seller willing to take the “as is” price!
Assuming that the seller and the business are ready to be seen on the market, the seller’s investment banker will develop a strategy and make a plan for conducting the sale. In anticipation of courting and impressing suitors, much information about the business will be gathered and prepared in presentable formats. Simultaneous to assembling the required company data, the investment banker will identify potential buyers.
First Dates
After the company information package has been prepared, suitors will be contacted by the seller’s representatives and the dating process begins! If the business is attractive, there may be a lot of attention right away; if not, it could take some time to woo the right suitor. Finding someone to get more serious with can happen soon (within a matter of a few weeks of going on the market) or it can take time (many months). For most, it’s not easy to find the perfect match.
The seller’s determination and commitment, having reasonable expectations, and the right professional team are key to having it move forward.
Getting Serious
Initially, limited information is provided to prospective buyers to determine their level of interest. If they wish to pursue the company, a non-disclosure agreement will be signed by the suitor and they will be provided a more intimate data package. A visit with the seller may be planned. If all goes well, a verbal offer or a letter of intent ( “LOI”) may be issued with the hope of making it exclusive. If the LOI is accepted and signed by the seller, it means that both parties think that it could be a good union, as they have agreed to provisional (non-binding) terms for the sale.
So far, this could have taken anywhere from a few months to a year.
And then comes due diligence.
While the suitor received much company information during the term of the courtship, it is during due diligence that the buyer verifies the accuracy of that information. Like an over-protective father or a future mother-in-law, due diligence is going to be resolute in its quest to find the truth. It won’t give its blessings until it’s sure that the seller has accurately stated the company’s facts.
Due diligence can involve a buyer’s team of accountants and other professionals looking at and requesting a multitude of information. It can take from a few weeks to a couple months (depending on the size and complexity of the seller’s business). During and after the buyer’s due diligence, the lawyers for both parties work to draft a mutually acceptable purchase agreement which will ultimately be the document signed by the happy couple (the buyer and seller) to consummate the deal.
Typically, this process can take 6 to 18 months.
Of course, some say that there is “love at first sight” – but not everybody believes in it!