Generally, the process can be broken down into four key stages:
- Preparing for sale, where you’re researching potential buyers and gathering the information you need to present the opportunity
- Marketing to potential buyers
- Considering offers
- Getting the final negotiations over the line
Getting your initial information preparation right
In this blog we’ll discuss what you do to get your initial preparation of information right to help make the transition through these stages as smooth as possible.
Difficult questions to answer
As you might expect, the process is not always straightforward. At each stage there are a number of key questions you will likely initially find difficult to answer, including:
- “How have you come to the decision to sell?”
This will be one of the first questions any buyer asks. You’ll obviously need to be able to answer it, and how you do so could affect your appeal in the market. If your reasons include elements like partnership disputes or falling profitability, you’ll certainly need to present them honestly but carefully.
- “How have you come to your price?”
This is not an easy question to answer – so you’ll need to do your research and get a valuation of the company from an objective and external source. This will tell you where your business sits within the market and provide you the opportunity to correct anything before selling.
- “Have you got all the correct documentation in order?”
One of the biggest stumbling blocks that SMEs find that when they do decide to put themselves on the market, they have incomplete records. A buyer will insist on seeing all minutes, resolutions, important contracts, and much more. You must be able to deliver all information quickly and efficiently to be convincing.
These are all questions that require answers backed by accurate and up-to-date facts and figures. So the question is – with these and many more questions likely to come your way – what’s the best way to prepare the information to give yourself the best possible chance of success?
Why preparation portal provides the solution
For some years, it has been widely recognised that the best way to manage a potential M&A scenario from an information perspective is to use an online virtual data room solution. Virtual data rooms enable you to store and order the information that potential buyers need to access as part of their due diligence.
What’s perhaps less well known is that data rooms also include ‘preparation portals’ that help you to get all your information organised before you reach the stage where you have potential buyers.
Essentially, a preparation portal is a restricted data room that contains all the necessary functions for preliminary work and preparations before potential buyer groups are invited into the data room.
Typically, the kind of detail you will want to work on during this preparation phase includes information related to:
- Financial performance – including not just profit and loss and statements, but also details of extraordinary costs.
- Business strategy – including not just value propositions, but also details of long-term strategy and market expectations.
- Assets, capabilities corporate documents – including not only lists of equipment or saleable assets, but also articles of association, certificate of registration, and minutes from board meetings and senior management meetings.
Clearly, having this kind of information well prepared and to hand is absolutely crucial for ensuring that you are able to answer any questions that may come your way.
Concluding thoughts: the impact of Covid-19 and next steps
Using a data room with a preparation portal is vital for making sure all information is correct before proceeding to a potential sale.
Right now, this is more important than ever. Due to the ongoing impact of Covid-19 it is difficult to build trust into relationships during preliminary M&A talks because of the lack of physical meetings. This means trust based on accuracy is paramount. There is no room for error when preparing for a sale, and preparation pre-due diligence needs to be absolutely right to give the transactions the best possible chance of completion.
Find out more about how you get your information right by learning about our data room and preparation portal solution. If you want to find out more about preparing to sell a business in general, download our guide to preparing your company for an exit.