March 23, 2021
Welcome to the sixth and final blog in our “Selling your business” series. In this blog, we will be giving you an overview of what a typical M&A process involves from first approaching buyers all the way through to completion.
Once your marketing materials and list of buyers are prepared, it is time to start reaching out to the buyers you have identified. The first step will be to contact the buyers on your list by email or letter. In most cases, the email or letter will be accompanied by an Executive Summary / Teaser and a Non-Disclosure Agreement (NDA), and after the NDA has been executed by the buyer, the company’s Information Memorandum is then shared. Typically, it can take several weeks to engage most of the buyers on your list to determine if there is interest in acquiring your business. Some will respond quicker than others, and a few will need persistence.
Soon after you engage with potential buyers, you will start to receive information requests and questions about your business from those interested in exploring the opportunity. While you can address these one by one, there are likely to be some recurring themes and requests. To pre-empt this, and save yourself a lot of time, it is advised you gather what information you are comfortable disclosing with potential buyers before entering into exclusivity with one party in the early stages of the process.
The information you share prior to entering exclusivity needs to sufficient to allow a buyer to assess your business and put forward an offer; anything more detailed that suiting that requirement can be saved for due diligence.
Once buyers have had the opportunity to ask a handful of questions after receiving the Information Memorandum, the next stage of the exercise will be to conduct management presentations. Management presentations are an opportunity for you to showcase your business to a handful of buyers, which can be done either face-to-face or over a videoconference call. Depending on how many interested buyers you have on the table, you may wish to restrict the number of presentations you carry out.
Next steps after this can vary depending on the process at hand. Some businesses will facilitate two or three presentations with buyers, but many will just give them the opportunity to request the additional information they need following the first meeting to submit an indicative offer. What is expected from the process is often set out in a process letter.
A process letter can accompany an Information Memorandum or follow management presentations. This will inform buyers about what you would expect to see in their initial offer letters as well as providing a deadline for offer submission. Ideally, all buyers should receive this letter at the same point in time to ensure all interested parties are moving at the same pace.
Once interested buyers have received sufficient, preliminary information about your business and are eager to proceed, parties will often reach an agreement in principle on the key terms of the transaction, known as “Heads of Terms”.
Whilst most of the document is not legally binding, Heads of Terms present you with an opportunity to flesh out as much detail as possible about the transaction, before granting exclusivity to any one buyer. If there is more than one buyer on the table at this stage, competitive tension can be generated to; 1) improve the terms of the deal, and/or 2) disclose any bad news (e.g. trading is below budget) with or limited detriment to the terms of the deal (buyers are less likely to ‘chip’ at the price if they are worried you will move forward with someone else). Although you can negotiate Heads of Terms with multiple buyers, you will typically sign the agreement with just one, granting them exclusivity for a period to get the deal done.
After Heads of Terms are in place, and exclusivity has been granted to a single buyer, the buyer will commence due diligence. This is the process upon which a buyer will investigate your business with a fine-tooth comb to flush out any issues and substantiate the information you have provided up until that point in time. This will then allow the buyer to conclude they are happy to proceed with completing the deal, and on the same terms as agreed in principle in the Heads of Terms.
Normally, most of the due diligence will be conducted by the buyer’s professional advisers. It will involve lengthy information requests and questionnaires, which can be very arduous and stressful. It is recommended that you get as much information about your business ready in the background at the start of the process, so that you are not fumbling around when due diligence begins. The exact elements and length of a due diligence exercise will vary business to business; the process can take anywhere between days and months. Typically, the main considerations will be financial, legal, and commercial.
Once due diligence is underway, it will be time to start drafting completion documentation. Depending on the outcome of due diligence, some deal terms may also need re-negotiation at this stage. Completion documents are usually drafted by the legal advisers on both sides of the transaction. For this, you will want to appoint a “corporate lawyer”, with adequate experience in advising on the sale of businesses.
Completion will take place when transaction documents are signed, and consideration has been transferred to your solicitors. In an ideal world, you will have a contemporaneous exchange and completion (these will take place at the same time). However, in some cases, this is not possible. Where this is not possible, the deal will ‘exchange’ once the transaction documents have been signed, with formal completion occurring later, once any conditions for completion have been met.
We hope you have enjoyed our “Selling Your Business” blog series and found it to be informative. If you are thinking about selling your business and would like a call to discuss how Bluebox can help, please call us on 0203 924 5150, or email us at email@example.com.
“We were delighted with the services that Bluebox offered us. Bluebox’s attention to detail through their Diamond Programme ensured that we were well prepared for when the business was taken to market and that the sale process itself was managed expertly.
We challenged Bluebox with finding the right strategic buyer and thereafter negotiating a deal that met our requirements. In helping initially to identify and to secure the deal with Mountville Mills they accomplished just that. Communication throughout was excellent and professional, managing each stage of the process. I would have no hesitation in recommending Bluebox to any corporate shareholder or private business owner looking to divest their business.”
Richard Millward, Former Client
“We were delighted with the services that Bluebox offered us. Bluebox were challenged with finding us the right strategic investor and, thereafter, negotiating a deal that met our complex requirements. In identifying and securing the deal with LGC they have done exactly that. The process itself was efficient and smooth, largely due to the excellent communication from the Bluebox team, who also demonstrated excellent experience at managing a very engaging auction process. I would be delighted to recommend Bluebox to any corporate shareholder or private business owner looking to divest a business.”
Helen Dickinson, Former Client
It has been a real privilege working with the team at Bluebox over this last year or so. Bluebox’s attention to detail ensured that we were well prepared for when the business was taken to market and the sale process itself was managed expertly. Starting the process, I had no idea exactly what this would entail and the volume of work that has been produced by everyone and the result reached today is nothing short of brilliant.
Hugh Morris, Former Client
We are delighted with the services that Bluebox was able to offer. They showed an intimate knowledge of a deal cycle, managed a tight auction process and were highly communicative from the start. I would happily recommend Paul and his team to business owners contemplating a sale of their business in the next 24 months. Experience is key and this has paid off for us.
Laurence Seward, Former Client
Aligning ourselves early with Bluebox, and entrusting the team to guide us through their process proved to be a highly rewarding investment from all viewpoints. Bluebox’s support significantly enhanced both the value of our business and its ‘saleability’. I would highly recommend Bluebox to business owners contemplating an exit in the next two years. The earlier the engagement the better so far as I am concerned.
Mike Minett, Former Client
We began working with Bluebox in early 2015 through their Blue Diamond Programme, as we were contemplating an exit. We found that the process focussed our minds on the key areas of growth in the business, and prepared us well for the inevitable rigours of due diligence. During the sale process itself, the advice offered by the Bluebox team was invaluable. We found them to be helpful, straightforward and honest.
David Stokes, Former Client
When selecting our adviser, it was extremely important that they had access to international buyers and were experienced in cross-border M&A. The team at Bluebox proved to be invaluable by identifying a strategic acquirer from America who was not known to us and by negotiating an excellent deal for all parties. I was also impressed with the process management from Bluebox, which ensured that the deal was closed in a timely fashion.
Jeff Weinstein, Former Client
When I first engaged with Bluebox, I was hesitant as to the benefits of using an advisor to firstly, find a buyer for my business and secondly, to get a deal over the line. However, now that the deal has completed with KPM, I can honestly say that the finer negotiation points handled by Bluebox and their overall management of this process has been nothing short of first class. I would be delighted to recommend Bluebox’s services to any entrepreneur contemplating the sale of their business.
Bill Ballard, Former Client
Bluebox worked closely with us over the following six months and helped us to implement some key initiatives which made InferMed a more attractive acquisition target. Once we decided to sell the business, the Bluebox team were very diligent in ensuring that no stone was left unturned. They negotiated expertly on our behalf to ensure we got the best deal possible.
Alan Montgomery, Former Client
The pre-sale planning programme that we signed up for with Bluebox made us develop our strategies and focus on the bigger picture. It proved to be a very rewarding investment from all viewpoints and significantly enhanced both the value of our business and its ‘saleability’. I would highly recommend Bluebox to business owners contemplating an exit in the next two years.
Nigel Parsons, Former Client
I have experienced first hand the value that can be created through highly structured pre-sale planning. It amazes me that it is not something that everyone does. It is so disappointing to see around 90% of transactions collapse before they complete and pre-sale planning will not only enhance your price, but also significantly enhance your chance of a closed deal.
James Caan, Investor
We worked incredibly closely with our advisers who provided expert knowledge of the sale process with which we were not familiar. We were truly delighted with the results.
Marten Nielson, Former Client
We appointed advisers to manage the sales process after we had received a number of unsolicited approaches for the business. I was incredibly impressed by the immense value that could be created by expertly negotiating with a group of already interested parties.
Paul Duckworth, Former Client
I was delighted with the service that the team offered and their real attention to detail. The deal was not without its complexities and it was reassuring to have such experienced advisers assisting me throughout the negotiations.
Peter Bennett, Former Client
Truly delighted with the way my sale process was managed. The fact that the team I worked with achieved such a great multiple is testament to their experience and their ability to create some true competitive tension.
James Averdieck, Gü, Former Client
The team at Bluebox provided invaluable support in negotiating this complex transaction. Their access to international purchasers, and exceptional knowledge of cross border M&A ensured that the deal was concluded efficiently, achieving a highly successful outcome for us all.
Jon Parslow, Former Client
“We selected Bluebox after a fairly long round of evaluating potential advisors because of their scientific, yet challenging approach to maximising value. During our initial meetings they showed us how far short of “ready” we were and consequently we completed more preparation in the early stages which meant we were equipped for what was to come. We were delighted with our choice of Corporate Finance partner. I do not hesitate in recommending Bluebox for any SME to consider.”
Simon English, Former Client
Bluebox provided invaluable advice in managing the negotiations with incoming investors. Their skills in handling these discussions were evident from the outset and the vital interface that they provided between the incumbent team and the incoming investors was truly beneficial.
Henry Braham, Former Client
Bluebox have a professional, dynamic and experienced team that is greatly assisting me with my focus on my exit within the next 24 months. Their structured approach is very refreshing and their ‘Blue Diamond’ programme is adding immense value.
Matt Evans, Former Client
The team at Bluebox provided me with a seamless service from the start of the engagement until our deal was completed. Attention to detail was commendable and their understanding of corporate M&A very impressive. I could not recommend them highly enough.
Victor Lewis, Former client
Having tried to sell my business previously – and failed – I was only too aware of the importance of pre-sale planning. This is a talented team offering a service that most people find out about, but too late.
Simon Hulme, Former Client
Bluebox are a quality outfit. Their access to International acquirers and relationships with the highest quality domestic investors was impressive. My shareholders and I received excellent service from start to finish and it was refreshing to be dealing with a senior team throughout the sale exercise.
Michael Clapper, Former Client
I cannot recommend the team at Bluebox highly enough. Their expert guidance throughout the entire sale exercise resulted in my shareholders securing an excellent deal with which the entire team was delighted.
Mark Rodol, Former Client
I’m really pleased with the service Bluebox provided. The team demonstrated excellent knowledge of the process to follow and led negotiations for the hospital in a way that allowed us to ensure we received appropriate value whilst focusing on reputational risk. Communication and service were of a very high standard.
Steven Davies, Former Client
With Bluebox’s expert advice we were able to find the right buyer that will benefit our business strategically. We’re delighted with the outcome and look forward to starting our new chapter
Clive Hillier, Former Client
The advice offered by the Bluebox team throughout the process was invaluable to the shareholders. We strongly believe that participating in Bluebox’s pre-sale planning programme was a significant driver behind the success of the deal. Their project management and negotiation skills throughout the sale process itself resulted in an exceptional deal being delivered to all parties involved.
Harpal Singh, Former Client