Since it is not every day that you sell your business, you may not know what the mergers & acquisitions timeline looks like. The M&A timeline is what we refer to as the process of selling your business, beginning with a business valuation, and ending at the close of the sale of your business. It is important to understand this timeline because it can take anywhere from 6-8 months, sometimes much longer depending on the deal size, complexity, and more. The M&A timeline and process we have set up is a series of phases that explains how long each phase takes and what you can expect from each phase along the way.
The first phase of the M&A timeline takes about 3-6 weeks. In this phase, we are on calls with you laying out the framework for the rest of the process as well as getting to know each other. We are collecting all the relevant financial and operational information from you so that we can create teaser documents and marketing brochures to give buyers, highlighting key components of your business that are buyer-attractive. We are creating secure data rooms for us, you, and the buyers to access confidential seller information. We may also be building a financial recast where we are adjusting items on your financial statements so they are in concordance with GAAP, which are standard accounting principles governed by the SEC.
The second phase happens in months 2-3. In this phase, we are aggressively searching for new buyers that fit the investment criteria your business fits in. We will be searching for strategic buyers who are willing to pay top dollar for a business that has synergies with their company. We will also be searching for financial buyers like private equity firms, family business entities, and companies that have experience buying businesses like yours, and that have other companies like yours in their portfolio. We search for new buyers through our databases, but also call upon connections with buyers we have closed deals with in the past that may be similar to your business.
The third phase happens in months 4-5. During this time, we will have several offers from buyers that we are sifting through to find the best fit for you. We will pick the best 3-5 buyers, and they will engage in a checklist of items they have before signing a Letter of Intent (LOI). You can expect the buyers to conduct site visits during this time, and for some negotiating between us and your buyers on the term sheet. The goal is to get to the LOI and to begin an exclusivity phase for a more detailed buyer analysis, which is next.
The fourth phase is the final phase in the M&A timeline and happens in months 6-8. Sometimes, depending on the speed of the phases above, this phase can start earlier for a given buyer(s). In this phase buyers will conduct buyer due diligence, and quality of earnings on your company to make sure they know everything they are getting into before ultimately drafting a sale and purchase agreement, or purchase agreement (“PA”) for short. The PA is a legal contract that details the terms of a transaction and forces a buyer to buy the business, and a seller to sell their company. On our side we will be hammering out the legal items that present themselves at the close of the sale of your business, working with an M&A attorney for the seller, and the buyer’s legal team. Depending on the deal terms, we will also review a seller’s note, usually in the form of a seller Promissory Note, as well as a seller employment agreement or consulting contract if they are going to work with the buyer after the sale as an employee or consultant, respectively. We will also be working with the buyers on the banking side to prepare for the close of the sale of your business.
Before you can decide to sell your business, it is important to understand how long that process takes. For example, if you are waiting to sell your business when your kid graduates from high school, you will want to start that process at least at the beginning of their senior year if not earlier. Remember the rule of thumb: the sooner you can get your business built to sell, and you are mentally ready to sell, the better off you and your company will be when you go through the sale process. Knowing how long the process takes gives you the ability to plan prior to selling your business. When you have time to plan to sell your business, you will achieve much more value for your business.