Conducting an M&A Structured Sale is a great way to sell a business particularly if it is receiving a lot of unsolicited interest. At its core, a structured sale is a process where a firm is marketed without a price and generates multiple offers in a short period of time. This then creates an auction for the transaction which simultaneously yields a number of good proposals to choose from. Equally important, the process occurs over a short period of time which is easier on the owners and minimizes the risks associated with breaches of confidentiality.
The attached one page PDF outlines the steps in a structured sale.
You can think of the process as a funnel that compresses a large pool of buyers down to one. At the top of the funnel are 50 to 300 buyers that consist of companies, private equity groups, and investors that are identified by both the investment banker managing the sale and the owners. This group is sent blind teasers and typically, 30 to 50 of them sign confidentiality agreements and are sent confidential information memorandums (CIMs). From these, 10 to 30 participate in introductory seller presentations now often done by Zoom or some equivalent. Usually, these presentations result in 5 to 20 offers in the form of Indications of Interest (IOI). After evaluating the IOIs with their bankers and other professional advisors, the seller may then select 3 to 5 of them that best align with their transaction goals and negotiate a Letter of Intent (LOI) with one. Once selected, the buyer will conduct final due diligence, negotiate the Asset Purchase Agreement and other associated binding contracts, and then proceed to closing.
For a business selling into an active market, the funnel narrowing process takes three to four months to reach the LOI stage, and another two to three months to complete the rest of the due diligence and contract negotiations. The transaction should close in five to six months. The keys to a successful structured sale are having a list of buyers that would be very interested in the opportunity, a good CIM and the information for initial due diligence assembled in advance so that buyers can make an informed offer quickly.
Businesses that are well suited to this kind of sale tend to be those with the following characteristics;
- Have an annual adjusted Ebitda of $1 million or greater.
- Operate in industries and markets that are highly coveted among the strategic buyer and Private Equity community where there is a lot of consolidation occurring.
- Are well run.
If you believe your firm is this type, then we’d very much to like to speak to you more about the structured sale process.
