In our last post we discuss how to develop a target list of potential acquirers. In this blog post we will discuss the next steps in the sales progression.
The two foremost ways to proceed with sales process are the direct and indirect methods. In the direct method the seller and trusted advisor put together a prospectus on the company. This document will discuss the selling company’s market, the overall health of that market and it’s growth prospects, where the selling company adds value to customers, its technology/services. There will be charts on market and company growth, broad narrative on opportunities, high level financials and the general location of the company, i.e. New England or Northeast.
Potential buyers are contacted by the trusted advisor to see if they would have an interest in looking at this generic type opportunity as the company is not mentioned at this point. If so, they are sent a copy of the prospectus.
The indirect method involves contacting the same group to see if there are areas both your company and theirs can collaborate profitably. This can be on a particular project, to private labeling each others products, to forming a joint venture. These discussions give you the opportunity to get to know the other players in the industry better and assess the value that can be created from a sale.
The three main upsides of the indirect approach are 1) you get to know the other players in the industry on a more personal basis, 2) you get a better view of what is going on in your industry, and 3) the word, or rumor, about your company being for sale doesn’t get out into the marketplace.
If there is a downside with this indirect approach, it is that it takes much more of the owner’s time and personal involvement.
In our final post on the process of selling your business we will discuss some of the documents and milestones you will encounter.