When Mid-Market Entrepreneurs call us to inquire about our Services, usually they are just at the beginning of thinking about exiting their business. They either need advice on creating an exit strategy that makes sense both for their business and them, personally, which is something we help with day-in and day-out, or they have already implemented an exit plan and are now ready to begin marketing the business. In either procedure, the best place to start is with a valuation.
Before you can develop a plan to exit, or execute on an Exit Strategy, you first need to be able to put a range of value or worth on your company. Of course, what a company will ultimately sell for is based on market value (or what a buyer is willing to pay), but our valuation experts can get you within a range of values that we are confident of based on current market trends, current valuation principals and known multiples we are seeing in our day-to-day business. The valuation is the starting point to get you to the end point, so we take a great deal of pride in getting you a quality opinion on valuation.
More often than not, when the valuation is curated and discussed with the Company Shareholders, decision are made as whether the timing is right to exit now, or to implement some strategies and exit down the road. ValleyBiggs can help both in strategy development and execution. And since ValleyBiggs is a 100% Success-Based M&A firm, Entrepreneurs should rest easy knowing that they can utilize our massive knowledge base and expert opinions to put the company in a position to be as successful as possible at launch, whether now or later.
What is also important to note is that we will be there with you throughout the exit. Our job is not to pressure you into taking the company to market quickly. Our job is to maximize your strike price, and by doing so, everybody sees better results based on the correct timing of exit. Rushing an exit is a terrible idea because usually that means leaving money on the table – whether it takes 1 month or 3 years, we’ll be with you throughout and you’ll only pay us once we successfully close your company. It’s hard to lose in that scenario.
Once our clients are ready to go to market, our teams work together to create a digital data room. The data room will house all materials related to the business, including the Deal Pitchbook, Non-Disclosure Agreement, Confidential Prospectus, Financial Statements, Taxes, Analytics, Valuation Report and much more. The entire process is handled digitally, highly confidentially and professionally – no forms should ever need to be printed out and scanned or faxed back in – we live happily in the digital age, which makes everything easier and more efficient for all parties.
Once the data room is complete and ready for Buyer review, we then begin marketing the business using our proven processes, which are generally different with each business, but can include interacting with Private Equity Groups within our network, listing the business for sale in high quality public domains (fully confidential), Venture Analysis, submission to our large group of VIP buyers as well as contacting synergistic buyers that might have an interest in the company.
Buyer Vetting Process
In the Middle Market, just listing a business for sale isn’t enough. You need to go well above and beyond for each business because many times you have to find a buyer in the middle market (which is much different than selling an SBE website or tech company, where buyers are readily available). For mid-market deals, a strategy must first be developed to create a short-list of potential strategic acquisition buyers. These kinds of buyers are best case buyers since they would be paying at the higher tier of the valuation range. The short list is created by both ValleyBiggs and the Shareholders of the Target; once approved, the business will be marketed in front of these strategic buyers on a confidential basis – known as “blind” marketing. Doing so helps to maintain confidentiality for the Selling Shareholders and ensures no current or future operations of the business are disrupted by the attempt at a business sale.
As we begin to receive responses from interested parties, we then begin the vetting process to ensure that the buyers we bring before our clients are real and have the ability to close. We will generally perform mock due diligence and earnings reports before putting Buyers and Sellers together, but once we have the right buyer for the company, and the seller is prepared, we get all parties together to begin discussing business operations.
Inevitably, as we go through the process of discussing the business with potential buyers, one or two particular buyers will stand out as the most strategic and best fitted. This is the stage where ValleyBiggs shines – Sellers need somebody in their corner that can represent the business in a light most favorable to the Shareholders to enhance the value of the company during the negotiation stage. While negotiations always have difficult sticking points and deal killers, expert negotiators are able to get all parties to agree to the Seller’s criteria and move forward, whether with respect to legal points or business deal points. The whole process must continue to move forward at a steady pace and it’s the job of the ValleyBiggs staff to ensure the process never stops and that all parties are fully apprised of the status of negotiations in real time.
If at any point the Seller is unhappy with the particulars of a negotiation, then the balance of the deal process will not go smoothly. This part of the process is delicate, and ValleyBiggs does a lot of hand-holding with all parties to ensure that the value of the company is maintained during negotiations and that all parties are achieving their individual goals.
Letter of Intent
The ultimate goal during the negotiation process is to obtain a Letter of Intent from the Buyer. LOIs are often are used in complex transactions when the parties want to tie down the principal terms of the deal early in the negotiations. An LOI is generally a short document signed by all parties to a proposed transaction that states a general agreement to certain key terms, such as the price and terms of sale. Letters of intent contemplate the negotiation and signing of a final, definitive agreement containing all the terms of the transaction. Most letters of intent are intended to be non-binding, except for items like confidentiality.
LOIs are not mandatory, and there is no reason why the parties cannot proceed directly to the final agreement without it; however, they can help streamline negotiations where the proposed transaction is complex, where the principal terms have not been agreed to, or where certain issues need to be resolved early during negotiations. In these situations it may be beneficial to obtain the parties’ written agreement on some of the "deal-breaker" issues before incurring the cost and expense of preparing and exchanging final agreements.
Definitive Agreement & Due Diligence
Once a buyer is chosen as the best fit for an acquisition, the process moves forward to Due Diligence and the creation of a definitive agreement. While the agreement is being drafted, the Due Diligence process begins and each party trades information until a comfort level is reached.
From a planning perspective, the parties usually set closing for 60-90 days after the LOI is signed. This provides ample time for Due Diligence, for the Funding Process to be completed and for the Definitive Agreement to be signed by both parties.
Throughout every single stage of this process, and including after closing, ValleyBiggs is there to guide its clients through the process. We believe that it is our job to ensure that the selling process is handled primarily by our teams so that company ownership can continue to operate their company on a day-to-day basis. If the company does not continue to perform throughout the process, it can raise concerns with buyers, so we prefer that our clients focus on their business while we focus on selling it.