4 Steps of the M&A Process

To a business owner who has never sold a business, the M&A process can seem mysterious. We all know it takes some time, likely some late nights, and teams of advisors, lawyers, and other professionals to help complete the final deal. Mysterious processes are daunting. Known processes are much less so.

Symmetrical Advisory is here to pull back the curtain. Buying or selling a business takes four specific steps. We usually advise our clients to expect the process to take roughly six months. Here is how they breakdown:

Step 1: Seller preparation

It is essential to have your house in order before even speaking with a buyer. During this phase, we focus on:

– Performing sell-side due diligence

– Establishing preliminary market valuation

– Creating/reviewing a buyer “wish list”

– Preparing and completing an executive summary and confidential information memorandum (CIM) for your business

This step typically takes one month to complete, but it can take longer if the seller’s financials are not in order or if there are other housekeeping tasks to complete before contacting buyers.

Step 2: Contacting potential buyers

This is when we start conversations. Using the list created in step one, we begin contacting potential buyers and distributing the executive summary. As needed, both parties sign non-disclosure agreements (NDAs). We also assist in the creation of a secure online data room for information to be shared privately.

This phase typically takes one to two months, but in today’s hot market we are sometimes seeing it proceed more quickly.

Step 3: LOI and negotiations

Now that we have identified interested parties, we can start exchanging key documents. During this phase, expect to:

– Receive and evaluate initial bids, or indications of interest (IOI)

– Set up management presentations

– Exchange data room access for buyer diligence

– Respond to diligence inquiries

– Prepare for buyer presentations between the IOI and letter of intent (LOI) timeframe

The IOI and LOI documents are critical parts of the M&A process. As such, they take time to develop and review. Sellers may also consider multiple buyer presentations, either in-person or virtually (more common during the pandemic). We typically tell business owners to expect this phase of the process to last roughly two months.

Step 4: Diligence through to closing

When movies portray the M&A process, this is often the phase they focus on. At this point, the seller has received and is evaluating final bids and LOIs from buyers. Negotiations and confirmatory due diligence are completed before all documentation is finalized.

In most cases, by step four all major decisions have been made and we’re down to details. This final phase can also take one to two months.

Why does the timeline matter so much? Because in many cases, particularly in today’s political climate, the seller has a deadline in mind. It could be an impending retirement, a new opportunity they want to take advantage of, or a financial situation they need to address. Planning appropriately is critical to achieving a deal on schedule.

Experienced partners in Middle Market M&A

If you are considering selling your business, please contact us for a confidential discussion of possibilities appropriate to your specific situation. We have direct experience helping business owners across all industries well their businesses, as well as relationships with buyers who are interested in new opportunities. We can help you position your business for maximum benefit when the time is right for you to exit.