The M&A Process – How to Prepare a Company for Sale

Many  entrepreneurs’ goal is to start a company, grow the business, operate  it effectively then eventually sell out their stake for a handsome  profit. According to Robert Uhlaner, lead of McKinsey’s global Corporate  Finance Practice, many business leaders are not prepared for the  intensity of completing an M&A deal. Many executives lose sight of  the strategic end goal and fumble along as the deal progresses.  Therefore, it is imperative to get familiar with the M&A process and  the key objectives at each stage in order to ensure a smoother, more  rewarding transition.

Step 1: Vendor Assistance – The Value of a Financial Advisor

The common expectations that M&A clients who are looking to sell  are to (1) obtain the highest possible valuation, (2) complete the  procedure in the shortest amount of time while (3) ensuring the tightest  measure of confidentiality. To achieve these objectives, it is  important to take a structured approach to finding the right buyer.

This is where the financial advisor comes in with a structured  filtering process to ensure that both the number as well as the quality  of potential buyers are as high as possible. Initial screening goes  through a rigorous process of deliberating the strategic rationale,  coming up with a sound valuation and assessing the overall fit for the  organization.

Step 2: Exit Preparation

Begin with an end in mind. Every M&A deal should consider the  ultimate objectives for the buyer, be it to maximize returns or to  achieve a strategic goal. In this step of the process, the financial  advisor will work with the client on the deal structure and exit  strategy for the buyer. Work needs to be done to prepare key items to  discuss during the negotiation process and identify potential deal  breakers. Lastly, a teaser containing an information brief should be  prepared for circulation.

Step 3: Competitive Auction

The next stage of the process involves getting bids from interested parties. There are a few key phases:

Non-binding offers

The teaser prepared during the preparation stage is circulated among a  list of preferred investors after confidentiality agreements are  signed. The client should provide limited access to information about  the company and conduct Q&A sessions to provide sufficient  disclosure to generate interest in the buyers. Interested parties will  then put up indicative offers which are non-binding in nature.

Binding bids

Investors are further shortlisted before moving on to this stage of  the process. At this point, the client will provide full access to  information for the buyers. The investors will then conduct due  diligence on the client by carrying out site visits, conducting  management presentations and gathering more information. By the end of  this stage, the client should expect binding offers from interested  parties.


Among the pool of interested buyers, a selected few will enter the  negotiation phase. Key commercial terms and pricing are discussed  throughout the process and the financial advisors will work with lawyers  to draft the sale and purchase agreement (SPA). The best offer will be  chosen for exclusivity and final negotiations.

Step 4: Closing

A final negotiation is done with the exclusive buyer before the SPA  and other transaction documents are finalized for signing. The client  will have to fulfil the conditions set out by the SPA before the deal is  finally closed.

The M&A process may seem like an arduous task to accomplish.  However, armed with the right processes and organizational skills, along  with a trusted financial advisor, business owners could unlock great  potential value.

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