Why do I need an investment banker or M&A advisor?

Our website is filled with descriptions of the services we provide for privately held companies. However, there are four primary areas where what we do for business owners is different than what is commonly provided by other professional advisors:

 

• Understanding and effectively communicating in writing to prospective buyers your core competencies that drive value. There is a “story” behind the success of every privately held company, and we consistently get compliments from prospective buyers on our ability to concisely capture in a Confidential Memorandum what makes our clients successful, along with future opportunities.

• Identifying and marketing your company to prospective buyers. Our prospect lists often contain up to 150 or more prospects including strategic companies and private equity groups. Upon our client’s approval, we market to all of these. Advisors that bill hourly aren’t set up to spend the time required to contact this many prospects, so the prospect that needs your company the most and may be willing to pay the highest price may never even be contacted by them.

• Establishing a “private auction” among interested buyers. Competition is truly the only way to know you’ve obtained the highest and best value for your company. We solicit offers from multiple interested parties; assist you in comparing them; and then negotiate separately with each party to improve the terms and structure of each one’s offer, to where there is an offer you accept. It’s impossible for most business owners to negotiate with multiple potential buyers at the same time; yet, that is one of our core strengths.

• Creatively solving problems. Problems, aka “deal killers,” arise through every step of the sale process. We use our extensive business experience across a wide variety of industries, our business acumen and our decades of M&A experience, to creatively solve problems and keep your transaction moving forward.

 

How do I know when to sell my company?

There are multiple reasons why owners decide to sell. The most common reason is a desire to create liquidity to facilitate the owner’s retirement or to secure the owner’s financial future. If this is your reason, it's important to assess if the estimated value of your business will meet your post-sale needs for income, etc. We can help you assess the value of your business, and a good wealth advisor can help you determine what amount you need. If the estimated value aligns with what you need, the time is right! There are other reasons owners decide to sell – to pursue other business or personal interests; for health or family reasons; or they may simply be bored and want to move on to something else. We would be happy to meet with you to discuss your objectives and if the timing may be right to sell your company.

 

Can I sell part of my business?

We can help you analyze the sale options for your company based on your size, industry and growth opportunities. Strategic companies typically want to acquire 100%; however, private equity groups will often acquire less than 100%, from a minority to a majority ownership interest. This is often described as taking “two bites of the apple,” selling part of your business today and the rest sometime in the future. For more discussion, see our article on this topic - Two Bites of the Apple.

 

How do you establish the value of my company?

The true “market value” of any company is the price on which a willing seller and buyer agree. Our objective is to present your company, its strengths, core competencies, financial results and opportunities, in the best possible light to prospective buyers. Then, we create a “private auction” setting and negotiate with all interested parties to obtain the highest and best value for your company – the true “value” of your company. That said, based on over two decades of experience representing the owners of privately held companies, we can give you an estimate of where we see your value, to make sure our expectations are aligned. If a formal valuation is needed, we can also refer you to trusted valuation professionals.

 

How do you identify prospective buyers?

We think creatively to identify multiple categories of strategic buyers and private equity groups that need the unique competencies that our client offers. We then use multiple databases, along with Internet searches, to identify buyers using specific search criteria including revenue, location, number of employees, industry and industry codes, subsidiary or affiliated companies and business description keywords. We combine our search results with suggestions from our client for the final list of prospects.

 

How do I keep this confidential?

We believe maintaining confidentiality is critical in every transaction. We do this in a number of ways including: Preparation meetings with our client are held at office or another offsite, confidential location. Our clients often use personal email addresses for communication about the transaction. Prospective buyers are required to sign an NDA before they find out who our client is. We watermark all pages of the Confidential Memorandum we prepare with the name of the recipient. Meetings or conference calls with interested parties are held at our office or another offsite location; never at the business. Tours of the business are held before or after hours when other employees are not present. Preserving confidentiality both prevents potential harm to the business and it conveys a strong sense of value to prospective buyers.

 

How should I run my business once we begin the engagement?

The most important thing you can do during the entire sale process is to make sure your business continues to perform well and on budget. To a buyer, there is nothing more comforting than seeing the financial results come in as expected, and there is nothing more disconcerting than having the financial results below expectations and trying to decide if it’s a short-term blip or something more fundamental. Run your business as though it may not be sold; make smart decisions; and hit your numbers.

 

How much of my time will be required?

The most important thing you can do is continue to successfully run your company while we run the sale process. There are generally three stages where your time will be required: (a) during the first month when we gather information and prepare a written memorandum; (b) during the marketing phase to interact with a limited number of prospective buyers via a conference call or in-person meeting; and (c) during the buyer’s due diligence to help gather required information and documents. Most of our clients find the time required of them is much less than they anticipated.

 

How long will it take before the sale closes?

Every engagement is unique, so the time frame can vary based on the objectives of our client and the nature of the transaction. There are several phases involved in every sale process including preparation, marketing, negotiation, due diligence and documentation preparation. Adding these together, a full sale process including marketing to multiple prospects can take from 8 to 12 months, while negotiating and closing a sale with a single buyer can be accomplished more quickly, albeit without the benefits of a competitive market.

 

Will there be a long transition after sale?

The time will depend on the interests of the buyer and seller and the needs of the business and can range from a few months to several years. However, since strong management is needed for every business, we advise our clients that their willingness to be available in some capacity for up to three years can add significant value to the transaction. The length of the transition period, along with your role, responsibilities and compensation, are things we routinely negotiate for our clients.

 

What other advisors do I need?

Selling a business is arguably the most important and complex transaction that most business owners will experience. For this reason, it’s imperative that business owners work with knowledgeable and competent professionals. The successful sale of a business requires a team effort, so make sure you have the right players on your team! In addition to Shoreline, there are three more key advisors that are instrumental in ensuring a smooth process and successful outcome:

 

1. CPA or other tax advisor: Your tax advisor will help you understand the tax implications of a proposed sale and help to maximize the after-tax proceeds.

2. Attorney: An experienced transaction attorney will make sure transaction documents are prepared correctly and that the seller’s risk exposure is minimized. If needed, the attorney can negotiate legal concepts and issues in the transaction with legal counsel for the acquirer.

3. Wealth Advisor: When you are considering whether to sell or not, a wealth advisor can help assess the value you need from the sale of your company to achieve your post-sale financial objectives. And, after a sale closes, your wealth advisor will help manage the proceeds in accordance with your risk profile and financial goals.

 

We have worked with many professionals in these categories and can refer you to the appropriate advisor, if requested.

 

When should I tell my employees?

We advise our clients that the best time to tell your employees is the morning after the transaction closes. At that time, you can paint a bright future for your employees under new ownership. Before then, you would only be creating questions and concerns in your employees’ minds about their future, and that can make them susceptible to recruiting calls, even from your competitors. In addition, employees may have a tough time keeping the information confidential, especially from their family and friends, and the word you’re for sale can gradually leak out. If you do need to involve one or more employees – for example, to help in producing required financial information – choose only trusted employees, and emphasize the importance of maintaining confidentiality.

 

I have an offer; what should I do next?

We are often contacted by business owners after they have received an offer, solicited or non-solicited. If you have received an offer and are interested in potentially selling your company, we are experienced in representing business owners in such situations. A key to maximizing value with a single buyer is to at least create the aura of competition; our representation conveys to the buyer the strong possibility of competition for the deal, and, if desired, we can identify and contact other prospective buyers to create actual competition. Lastly, it is difficult for business owners to negotiate on their own behalf, especially with a single buyer, and it’s even more challenging if you may work for the buyer after Closing. We can negotiate on your behalf and, when needed, tackle the tough deal points without jeopardizing your relationship with the buyer. A variety of things can go wrong when there is a single buyer. We often say that “one buyer is no buyer;” the closer you get to Closing, the more the buyer will control things, including attempts to reduce the price. In addition, your emotions can get in the way of obtaining the best value, particularly if you may work for the buyer after Closing. Our advice is that you contact an experienced, licensed investment banker (we know some!) who can represent you in negotiations and advise you on deal terms and other issues. Engaging an investment banker also conveys to the buyer the possibility of competition for the deal.  For more discussion, see our article - Common Mistakes to Avoid When Selling a Business.

 

I've been approached by a buyer, what should I do?

This is common in today’s market where prospective buyers are actively seeking acquisitions. While knowing your company is of interest to someone may be enticing, be careful with your response. Your response to the telephone call or email message should be, “Thank you for your interest.  While we are not for sale, I would be happy to let you know if that changes in the future.” We advise business owners to never dabble in the sale of your business; either you are for sale or you are not. If you are potentially interested, we can help you assess the market for your company and explain the sale process. Keep a list of interested parties that have contacted you; they may be prospective buyers when the time is right. See also a description of the sell-side services we provide and our article, Common Mistakes to Avoid When Selling a Business.

 

Should I sell to a competitor?

As a category, competitors represent the highest risk to your company from confidentiality being violated – they will know you’re for sale and, if they don’t complete the purchase, they may go after your employees, customers or suppliers. In addition, competitors are interested in your company primarily to gain market share, not because you add something new to or expand their business offering. Your value is likely higher to companies in other related industries where your products, services, markets or customers will create new business opportunities for the buyer. For more discussion, see our article - Common Mistakes to Avoid When Selling a Business.