The Divestiture Process
The Divestiture Process
Most divestitures proceed through the following steps:
Goals: Working with the ownership or management team, we identify the goals desired in a sale. During this stage, we may work with your other advisors such as attorneys or accountants to be sure that legal and tax considerations are taken into account.
Valuation: We often prepare a detailed analysis of the range of value that should be achieved in a sale. We review this with you and affirm the decision to go forward.
Information Memorandum: We prepare a brief but detailed information package. It includes financial information (historical and projected) along with a description of the company's markets, clients, competition, staff, facilities, and other resources. The information memorandum is designed to contain enough information for a prospective buyer to make a decision whether to make an offer and, if so, the form and amount of the offer.
Prospects: Using our network of industry contacts along with others that we research for each project, we develop a targeted list of potential acquirers and review it with the seller. We contact prospective buyers by telephone or e-mail and screen them for interest. Even if preliminary discussions are already underway with one prospective buyer or one buyer is preferred, we have found it usually in the seller's best interest to solicit additional buyers.
Confidentiality: We require prospective buyers to sign confidentiality agreements before we share any proprietary information. When necessary, we will negotiate the terms of these agreements.
Meetings and Discussions: We follow up with the information memorandum recipients to assess interest, provide additional information as necessary, and arrange for site visits or "chemistry meetings" between the seller and prospective buyer executives.
Negotiations: We conduct negotiations with prospective buyers, with the goal of obtaining satisfactory offers. We make recommendations on the form and terms of the sale based on analysis and evaluation of the offers received. When both parties are in agreement on the main points of the business deal, a letter of intent (almost always non-binding) is prepared and signed.
Due Diligence and Purchase Agreement: Once the letter of intent is signed, accountants or buyer financial staff conduct a detailed "due diligence” investigation of the seller's financial condition. Typically at the same time, attorneys typically begin drafting the definitive sale contract. We advise the seller and his or her professionals during this process.
Employment Contracts: We make recommendations and negotiate selling executives' and key employee salary arrangements, including non-competition terms.
Closing: We assist with the problems that will arise prior to closing.
While this is the typical pattern, every transaction is different. Depending upon the circumstances and the needs of sellers and buyers, some of these steps may be omitted or occur simultaneously.
Throughout the process, our goal is to assure clear communication and identification of all key issues, so that no problems surface at the last minute to delay or kill the deal.