Key Questions to Determine Scope of a sale Process (Posted 07/01/2021)
We offer you some of the key questions that can be used to begin to ascertain how broad or how narrow your sale process should be:
Is there a small number of buyers who would reasonably have interest and have the financial wherewithal to pay a fair price for your business?
In some situations, it’s obvious there are only a handful of buyers who will derive great synergies and other strategic value from the acquisition. Often this handful includes key competitors. If these players also have the financial ability to pay a fair price, a broad process may not add further value to your deal.
Is your business where very specialised industry experience and knowledge are required in order to get comfortable with the acquisition?
In some cases, there is a long list of potentially interested buyers, but we know that a buyer needs specific industry knowledge to become comfortable with the due diligence information and ultimately close on the deal. This is often the case if your industry is one where market or regulatory conditions are going through rapid change and, as such, we would likely focus only on buyers who are "in the know".
If your industry is not like this and is more readily understood by even those who are not industry specialists, it typically means there is a longer list of parties that could complete your deal at maximum value. Therefore, a broader process could be your best route to ensure you flush out the best bidder.
Will it be damaging to the business to share confidential information to numerous parties?
If handled in the correct manner the information shared with intrst parties is done under an NDA, and limited information ahead of this.However, if it is of an issue then a more targeted process may be appropriate.Then we would approach a small number of buyers with a particularly high priority on limiting disclosure of information to parties subject to an NDA.
What Process is Best For You?
At the end of the day, what you need to properly determine an appropriately targeted sale process is a rigorous, experience of each individual buyer’s habits in other deal situations as well as additional market intelligence. Your analysis should consider not only the obvious buyers, but some of the "dark horses" as well.
It is surprising how often the winning buyer is a group that wasn’t on the initial "A list" of buyers. Evaluating and managing multiple buyers can be challenging, but a good financial advisor will guide you through this to give you the best chance of closing a successful deal that meets or exceeds all of your objectives