Steps Involved in Selling Your High Value Company
Perhaps you’ve been thinking about selling some of your accounts to free up cash to achieve your growth objectives or pay down your debt; or you may even be ready to make a complete exit. But how do you “test drive” the idea to help you make a decision? First, it’s a good idea to know what steps are involved in the process and how long the process might take.
While each selling agreement is unique, the following are the TYPICAL steps involved:
1. THE LOI. Aconsiderable number of purchases start with a Letter of Intent (LOI). An LOI is drawn up by the purchasing party for the seller, clearly asserting their intentions to move forward with purchase details, negotiations, and due diligence to lock in the sale of the business.
This generally includes, but is not limited to:
- Transaction description, including the type of deal and the liabilities to be assumed
- Purchase price and deposit amount, structure, funding, schedule and other financial conditions as needed, and
- Additional terms, such as expectations and non-competition requirements
It’s important that the purchasing company clearly states their intentions in the Letter of Intent and avoids vague or ambiguous provisions
If the seller agrees to the LOI, the purchaser can then complete what’s called Due Diligence.
2. Due Diligence is when the purchasing company examines the selling company’s financial statements, accounting and business records, along with the customer contracts. The purpose of due diligence is to see if there are any red flags in the company’s records and also acquire information to accurately value their assets.
Due diligence can take time, especially if the transaction is a large-scale negotiation. Before this effort begins, it is a good idea for the selling company to ask the purchasing team to sign a Non-Disclosure Agreement (NDA). This contract safeguards a selling company’s information and ensures its privacy is not compromised. In other words, use of the records on anything outside the business deal is off limits.
3. Typical Timeline
Purchasing a business can take anywhere from a few weeks, to a few months, or even a couple of years, to complete. The time required primarily depends on three factors:
- The size of the business
- The number of iterations of negotiations needed to come to an agreement
- The due diligence period needed to wrap up the deal
What does this mean in practice?
First, don’t wait to begin considering your liquidity options. Participating in a dealer program is very different from a one-time acquisition of some or all of your accounts.
Second, when you’re ready to take action on your liquidity options, you’ll want to work with the right buyer, a trusted and experienced buyer, who will not only value your accounts and your business fairly, but will also recognize your unique situation and follow through on your company’s commitment to integrity, superior service, and customer focus.
Where do you begin?
ACA has resources to help. Contact ACAto have a preliminary discussion about your company and your particular needs. Then, click here for a copy of our whitepaper, Transforming Your Company into a High-Value Business, to help you get ready to achieve your personal and business goals.