Navigating a business sale from start to finish is a complicated process that gets even trickier if you focus more on your potential buyers and forget to turn the lens on your business in the first place.
Since you only have one chance to get the sale right, it is crucial to conduct a thorough and effective sell-side M&A process.
In this article, we'll learn how the sell side M&A process works and the strategies you can use to ensure a smooth, successful sale.
One notable aspect is that the entire process requires top-notch experts like investment bankers to guide you through everything.
At Exitwise, we can help you hire the best M&A experts to help you with the sell side process. Reach out to us today to hire and manage your dream M&A team for a smooth sale with the highest possible sale price.
Sell side M&A is the process by which you sell your business when you want to exit the market.
It's basically how the deal process looks from your perspective as the seller or business owner and your M&A team.
The sell side experts typically represent investment banks or advisory firms that sell a company or business on your behalf. The team comprehensively analyses your company, its financial health, and its operating market.
The experts then work closely with you to develop a detailed strategy for marketing and selling the company to prospective buyers.
You can enjoy the following benefits from the M&A sell side process:
Experts in the sell-side process make buyers or investors buy stocks, assets, or entire companies by acting as intermediaries between you and prospective buyers.
Here’s how the process works:
Next, we'll examine the different M&A auctions and the stages involved in the auction model to understand how the sell-side process works.
Your investment banker can choose from a broad auction, limited auction, or even a targeted auction approach based on your specific needs.
Here's how the three auction types stack up against each other:
Broad Auction
Limited Auction
Targeted Auction
In a broad auction, the banker contacts many potential buyers to participate and submit bids.
In a limited auction, the banker selects a small group of prospective buyers for the bidding process.
A targeted auction involves asking two to five specific prospective buyers to submit bids.
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Let's now check out the essential steps investment bankers follow under the M&A auction model.
The typical M&A sell side process follows the stages below:
Preparing your business for sale involves steps such as:
Valuing your company determines its fair market value and involves collecting financial information such as past tax records and financial statements.
Valuation also involves selecting valuation methods, such as discounted cash flow and transaction multiples. Using a combination of different methods is advisable for a better valuation.
The steps below are crucial during due diligence:
At this stage, the M&A team shortlists buyers based on their non-binding offers, which show their buying interest and the terms they propose.
The team also negotiates the deal terms and structure, the proposed purchase price, and the terms of payment with the shortlisted buyers.
Once you select the winning bidder, the M&A lawyers draft a sale and purchase agreement to outline the terms of the sale.
The sell-side M&A experts may help the buyer execute the transition and integration plan by sharing their knowledge and assisting with employee onboarding.
Selling your company or business is quite challenging. At Exitwise, we help you hire and work with your dream M&A team to sell your business at the highest valuation possible. Connect with us today.
The primary role of the sell side M&A advisory team is to execute the deals they receive from you, either as a company or an individual business owner.
Their main objective is to sell your business or company at the highest possible price. Since it takes a whole team to make the sale, the activities of different advisors may overlap.
The sell side M&A transaction largely features the work of the investment banker, who may undertake roles and activities such as:
Your banker also receives the letters of intent and binding offers and signs definitive agreements.
The sell side M&A process isn't easy, and knowing the potential challenges is a good way to learn how to navigate them when they arise.
Here are some you may face:
Here are some FAQs on the sell side transaction process:
The M&A sell side timeline can be a few months to a year and even more, depending on prevailing market conditions, how well-prepared you are as the seller, and how complex the deal is.
The following documents are essential during the M&A sell side process:
Since gathering and processing these documents can be challenging, you can enlist the help of various M&A experts. We can help you find, hire, and manage a team to work with you in preparing the documents, among other activities.
Your tax liability as a business seller depends on various factors, such as your state and how you structure the deal. You might be liable for capital gains tax and federal income tax.
When selling a company, you should prefer a stock sale rather than an asset sale to avoid double taxation and enjoy long-term capital gains tax rates.
Here are some exit strategies to use if sell side M&A isn't an option:
Getting a business sale right takes a lot of effort from the owner and every stakeholder in the sell side M&A process.
You'll want to work only with the best experts, and we at Exitwise can help you recruit and manage your dream team of M&A professionals.
Connect with us today to hire the right team for a smoother M&A process that ends in a successful sale.
Let Exitwise introduce, hire and manage the best, industry specialized, investment bankers, M&A attorneys, tax accountants and other M&A advisors to help you maximize the sale of your business.
