How We Do IT
The Controlled Informal Auction is a tried and true approach to M&A that will deliver the best buyer for your business. The time frame is generally 3 to 9 months depending on the number of buyers and how quickly they begin to come forward. Here’s how the process works:
First, you should have a business valuation done so that you know the “fair market value” of your business; the base value your business would have to a non-synergistic or non-strategic “financial buyer” in the marketplace. This is your sanity check.
Next, we develop a list of qualified buyers which may include competitors, customers, suppliers, private equity groups or others who want access to your customers or need your location for their products or services. You, of course, would approve the final list of buyers prior to ROI beginning the process. Any buyers you do not want on our list, would be removed.
In “packaging the business” for sale, we complete a detailed Confidential Offering Memorandum that includes not only financial information but also the “back story” as to why your company has value. Our team will understand these facts and be proficient in explaining them. We contact the target companies directly while maintaining confidentiality until a strong non-disclosure agreement is in place. In a good auction there may be 5-8 buyers in this first phase. Generally only the top eight will be contacted initially. This keeps the number of buyers “in the know” to a minimum, but provides for a solid competition for your company.
ROI Corp then proceeds to narrow the list by reviewing Letters of Interest from potential buyers and providing feedback designed to encourage the best offer. Once the first offer is received, we alert the other potential buyers so that they can come forward in a timely fashion with their offers.
The offers are reviewed and a final and smaller group of buyers (usually 2-5) is assembled. At this stage a lot more than offer price can be evaluated. As the owner, you may want to consider such issues as key employee protections, tax minimization, gut-feeling, employment options for you, etc. We’ll help you evaluate the offers and feel confident about your decision.
Once the members of the final group are re-contacted and final offers are in place, a first and second place winner are selected. Remember, the first deal may fall through so the backup buyer is important
ROI Corp then helps to finalize the deal with the first choice company while keeping the back-up option in the wings. The process ends with a successful sale of your business for the highest possible price.
While there is more that goes on in Controlled Informal Auction, these are the general steps.
You may have the option to sell only 70% (or some other percentage) of the ownership and retain a position of leadership with a second, and sometimes larger, liquidity event down the road. Five years is the typical hold period but is can vary widely depending on the desires of buyer and seller. This can give you security today, continued employment with income and a second bite of the apple! See below!