Written By: Michael Wolfe, CPA/ABV, CVA
Are you thinking about selling your business? If you are preparing to sell your business or are currently in the process, it is important to understand the various components of the M&A process. In this blog, we will discuss the six major stages of selling your business.
Reverse Due Diligence
Reverse Due Diligence, typically done by a third party, enables a business to assess its readiness for sale and take corrective action before being presented to prospective buyers.
Information for the Buyer
Information about the business that enables the Buyer to make an informed decision on whether or not to move forward. A Confidentiality Agreement is usually signed at this stage.
Asking Price & Negotiation
The seller should have a price in mind backed up by realistic business valuation methods. Too high of a price wastes everyone's time if the Buyer walks away. Too low of a price leaves Seller's money on the table.
Buyer's Letter of Intent
In conjunction with legal counsel, a Letter of Intent (LOI) is prepared which outlines the general terms of the deal, subject to the Buyer's Due Diligence. In many cases, the company is taken off the market until the Buyer completes its Due Diligence.
Buyer's Due Diligence
Buyer's chance to evaluate, in detail, the strengths and weaknesses of the company. Offer may be reduced if the Buyer perceives more risk than originally anticipated. This is why the Seller's Reverse Due Diligence becomes so important.
Agreement of Sale & Closing
In conjunction with legal counsel, an Agreement of Sale is prepared which specifies the deal terms and covenants of the Buyer and Seller. Followed by a closing where funds are transferred.
If you are a business owner and have questions about succession planning, buying or selling a business, or business valuation, please contact W. Michael Wolfe, CPA/ABV, CVA at 717-358-9102 or mwolfe@troutcpa.com.
