Companies that want to sell a division of themselves or their entire business must undergo a rigorous dealmaking process. The process can be complex, and the assistance of mergers and acquisitions (M&A) advisors can help streamline the sale process. Virtual deal room software can also help facilitate a secure and successful M&A process. Here is an overview of the sell-side of the M&A process:
Pitching the Transaction
If a company decides to sell, investment banks and outside lawyers can pitch their services to the sell-side. The pitching process is sometimes known as a bake-off or beauty contest. It is the responsibility of the in-house counsel of the selling company to check the merits of the pitches. Doing so will help the seller choose the right advisory team of investment bankers and outside lawyers. Sell-side pitches can contain an analysis of industry considerations, a contemplated timeline, and an evaluation of potential buyers. The pitching banks and firms can discuss their previous experience performing similar transactions in their pitches.
Due Diligence Process
After the sell-side chooses an M&A advisor, the due diligence process starts. This involves creating a virtual deal room to upload relevant documents, templates, and other due diligence materials. These materials help advisory teams put together the necessary financial models and marketing materials for prospective buyers. Deal rooms can help both sellers and buyers streamline their due diligence processes. Conducting due diligence on potential buyers helps sell-sides maximize profits for a successful M&A process. Due diligence also helps buyers understand the selling company’s weaknesses and strengths. This helps buyers prepare questions for the sell-side. The sell-side should be able to address and mitigate any liabilities or risks that may minimize their profit.
Valuing the Business
The sell-side should determine how much their business is worth before seeking a buyer. They should assess the business’s discounted cash flow and conservative growth projections. To conduct a discounted cash flow analysis, value the business as a multiple of its profits. Companies that are growing fast call for a higher multiple than those that are maturing. Remember to justify the additional expenses for potential buyers when valuing your business. The sell-side should focus on whether the growth projections are accurate and whether the valuation is attractive to prospective buyers. If the valuation is positive and appealing to buyers, the sell-side can start actively looking for a buyer.
Closing the Deal
Negotiation is the last part of the M&A process, which involves selling the company. Final sales negotiations include finalizing board approvals and signing the buyer agreement. Once the sell-side chooses a buyer, their in-house legal team can work with the buyer’s legal counsel to negotiate the terms of the purchase agreement. The winning bidder usually has the highest purchase price, but if another bidder provides a higher chance of closing the deal faster with an all-cash offer, the sell-side may decide to change buyers.
Choose a Reliable M&A Virtual Deal Room
Find a reliable virtual deal room to keep M&A documents secure during deal negotiations and the due diligence process. Reliable deal rooms are designed for collaboration and are accessible to all involved parties regardless of their physical location. Contact a deal room provider today to learn more about how this software can help streamline your next M&A process.
