[This is a guest article written by Virginia M. Turezyn. She is a managing partner at Sival Advisors LLC, a boutique M&A advisory firm for technology and service businesses in the middle market.]
If you think it’s been a challenge to build your company, grow your customer base, hire and retain the right talent and eke out a profit over the years…now you are about to be put through a daunting set of hurdles to prove it to a skeptical buyer. Every stone will be unturned and achieving your forecast during the process may be one of the toughest tests of all.
Buyers have a fiduciary responsibility to their Limited Partners to thoroughly evaluate all aspects of your business. Key areas of focus will include:
In a due diligence process there will be discrepancies or items requiring further investigation. The cleaner the review the smoother the overall process and likelihood of closure and initial offer maintained.
Generally senior management team members are actively engaged in the due diligence preparation and discussions. Customer reference checks are generally held off until the end of the process to ensure minimal leakage of a transaction and concern among customers as to resolution.
Concurrent with the due diligences process will be the preparation of a Purchase and Sale Agreement and Exhibits. Buyers Representations and Warranties will be a part of this Agreement. A closing timeline will be coordinated and there will be some post-closing adjustments generally to true-up the working capital to be retained in the business.
Upon closing, key customers and employees should hear it first from management and a general press release is generally issued to broadcast the news and create positive energy around the transaction.
If the business is run smoothly during the process, the next phase of ownership can take on a well run business and maintain positive momentum for the company employees and its valued customers. For more information, check out part one of the series on being prepared to exit your business and part two on completing the right buyer for your business.