Many sellers think the sole role of the business intermediary is to find a buyer for their company. Business intermediaries do a lot more than just finding buyers, as the following will demonstrate. Here are just a few of the valuable services they provide to a seller:
1. Work with the seller to arrive at a value for the company
An intermediary will work with the financial officer of the company to look at the historical numbers and assist in the recasting of the statements. Realistic projections may also be prepared. A firm valuation number may not be settled upon, but rather a range which the owner (or management) and the intermediary are comfortable with. Terms and structure will also be agreed upon or discussed based upon the current market. Compared to other advisors, intermediaries usually have more current statistics regarding the value ranges of small to mid-sized businesses in any given market or industry. This is especially true when an intermediary specializes in a particular field or industry.
2. Assist in selecting other members of the sales transaction team
A seller may have legal and accounting advisors. However, it is important that these advisors have the requisite experience in deal making. A business intermediary can often supply the names of advisors with the necessary experience to avoid the mistakes less experienced advisors frequently make.
3. Prepare the necessary documentation to market the company
It is critical that the marketing documentation do two things: create interest in the company, and then provide all of the background information necessary for a prospective buyer to determine whether this company is worthy of his or her continued interest.
4. Identify prospective buyers
It is important to determine what an appropriate buyer would look like financially, strategically, individually, etc. This determination requires honest dialogue between the intermediary and the seller regarding the seller’s specific goals and objectives as well as the seller’s opinions on the best type of buyer for his or her company.
5. Develop a marketing plan
An intermediary will create marketing strategies to reach the most probable buyers. Methods based on the intermediary’s databases will include direct mail, print and web-based advertising, emails, and phone calls.
6. Interview, qualify, and inform prospective buyers
This includes obtaining Confidentiality Agreements, setting up site visits with qualified and interested prospects, handling buyer questions and requests for more information, and discussing financing details with prospects. This happens to be the most time-consuming step in the sale process – a step the seller never sees, as it is performed in-house by the intermediary.
7. Begin the purchase proposal process
An intermediary will work with prospects on Letters of Intent (LOI), review proposals, and coordinate and attend buyer/seller meetings and Purchase and Sale discussions.
8. Negotiate details
Once a LOI has been drafted, sale details are negotiated. These details include price, terms, structure of the deal, and how the due diligence process will be handled.
9. Manage the due diligence process
Much of what is included in this process should have already been identified. This includes review of leases, contracts, agreements, etc. An experienced intermediary will help in offering suggestions about the timing and processes to help maintain confidentiality during this critical stage in the sale process. An intermediary should review drafts of the final purchase agreement, make sure they are in line with what was discussed and agreed on between the buyer and the seller, and offer suggestions if anything appears out of line.
10. Coordinate closing activities
This includes completion of documents, assignments of documents, and working out how the actual change of ownership will transpire.
This is just a brief overview of all that a business intermediary manages in the sale of a company. He or she attends to all the essential tasks from beginning to end, minding the big and small details. Through the entire process, the business intermediary also monitors those situations threatening to spring up that could cause the sale to “crater,” such as misunderstandings or the unexpected surprises almost guaranteed to occur in the sale of any business. Keeping the deal together from beginning to end is a valuable service provided by an intermediary to both buyers and sellers.