The business owner who acts as his own advisor risks losing value

Managing the sale of a company may appear complex, but the objective is simple: to seek the highest sale price for a seller (our client). Whether the whole company, or only part of it, is being sold, the key steps of the process are as follows:

I ASSESS AND VALUE THE BUSINESS
II FIND AND CONTACT POTENTIAL BUYERS
III PRODUCE THE SELLING DOCUMENT / PRESENT THE FINANCIAL MODEL
IV TERM SHEETS AND NEGOTIATION
V DUE DILIGENCE
VI CLOSING

I ASSESS AND VALUE THE BUSINESS

We begin by thoroughly understanding the client’s business: its products, services and markets, strategy, management, competition and any other factors that may affect its value. We create a detailed, integrated Financial Model of the company that shows its projected cash flows, both operating and investing, including capital expenditures and working capital, as well as prospective balance sheets, income statements and financial ratios. In this way, the impact of commercial and financial strategies can be quantified. As a first indication of value, we research similar companies and deals before proceeding to a full valuation exercise based on the Financial Model (see Valuation). The results of this exercise form the basis for negotiating the price at which the company’s shares should be sold.


II FIND AND CONTACT POTENTIAL BUYERS

To identify potential investors, we use our extensive network of personal and institutional contacts, Osprey research databases and other advisory firms, as well as trade shows, trade organisations and conferences. We write a summary document (called an ”Acquisition Opportunity”) commonly referred to as a “Teaser” which highlights the opportunity but does not disclose the company name. If a potential investor is interested, and signs a Confidentiality Document, he may receive an Information Memorandum and a version of the Financial Model.

III PRODUCE THE SELLING DOCUMENT / PRESENT THE FINANCIAL MODEL

The “Information Memorandum” (IM), which is usually produced, documents all relevant aspects of the company and presents its prospects objectively. Writing a good IM is hard work and requires a combination of thorough business analysis and clear jargon-free prose.

Information provided to potential buyers will include the Financial Model. This is becoming an increasingly accepted practice and facilitates the discussion and negotiation with counterparties. It is usually to the client’s advantage to use the Financial Model prepared on his behalf as it permits him to define the parameters of the negotiation and to control the process.

IV TERM SHEETS AND NEGOTIATION

Based on the results of steps I to III and further negotiations with interested investors, we design a Transaction Structure. We invite potential investors to submit “Term Sheets” for review and together with our client decide how to proceed. Depending on the type of transaction, we normally lead the defining of terms and negotiations of those terms with the buyer. We work closely with lawyers on (both sides of) the transaction in order to ensure that the commercial intent of the documentation produced is not obscured. Throughout this process, it is our job to obtain the best conditions for our client (the Seller).

V DUE DILIGENCE

We typically act as coordinators of the various financial, legal and industry specialist due diligence teams that can be used by a buyer. We help co-ordinate with the client’s personnel and smooth what can be a disruptive and time intensive process for the client’s business.

VI CLOSING

We remain heavily involved at this stage, making sure that the lawyers focus on completing the transaction. We also help reconcile any issues that may have arisen as a result of the due diligence process.