We can briefly run through the stages a typical sale of a company is passing through;
Clarification stage :
The owner and KBA are going through reasons for selling and what the alternatives are.
When the two parties have agreed upon a contract for selling the company, then it is necessary to discuss timing of sale, strategy for the sale and how the communication to employees and interested parties shall be executed.
When the contract has been signed, KBA will start the work to put together a Prospectus for the company. At this stage it is necessary with a good communication between the KBA and key personnel representing our client. We will highlight the history of the company, the strategy, strengths and weaknesses and look into possibilities and threats in the future. Very often will a large portion of this information already be available in some form inside the company.
Accounts for several years, budgets for the coming year as well as recent financial reports must be made available. We very often use an assessor to assess property and equipment in order to disclose any hidden values.
A short version of the Prospectus will also be made.
We will establish a “long list” for all potential buyers of the company. At this stage we are not very critical adding names to our list. During the sales process a large number of new names will be added to this list. It is KBA’s task at a later stage to “wash” the list, sorting out all uninteresting buyers. This list will contain industrial buyers looking for synergy effects as well as investors. Some of the buyers will be listed companies and others privately owned companies.
Communication with potential buyers:
At this stage we will start being critical and investigate each potential buyer through our own channels. We will communicate with all the parties on our list in order to find out their intentions. This work is mainly done over the phone. At this stage we will not reveal the identity of the company for sale. We will however submit some key information in order to measure the interest. Some of the names on our list will at this stage disappear for various reasons, and we will be left with a more active number of interesting potential buyers.
Close cooperation with the buyers
After suitable time, we will follow up our initial contact with the buyers on our list. At this stage the interested parties will have signed a confidentiality agreement and we are able to send a Prospectus containing more information on our company for sale.
We will follow up any questions related to the Prospectus and make any efforts to satisfy demand for information. This process can go on for several weeks.
Communication with owner / management / investigating products and location
During our conversations and discussions with the buyers, a number of interesting parties will disappear and we will be left with the “hard core” having the will and ability to make a deal. These are welcome to have a closer look at the company and they might want to meet the management of the company. At this stage the future of the Manager of the company will be raised.
Establishing the final heat
At this stage the potential buyers have probably satisfied most of their needs for information and it’s time to find out if we should go for a one-to-one negotiation or whether we should arrange for “bidding process” for the company.
We must also try to judge the buyers ability to pay the price expected for the company. KBA will at this stage indicate the price level wanted by our client. Some buyers can be scared and disappear. If we are left with more than one serious contender, then there is a possibility to have a bid round.
We will also clarify whether the buyers are interested in buying the shares or the content of the company.
Normally it is an advantage for seller to have a bidding round compared to negotiating with only one party. A buyer who is experiencing that he is “the chosen” will very often expect some sort of discount.
If we settle for a bidding process, we will issue bidding instructions to all interested parties. Here we give instructions as to what the bid shall contain: price for the company, how the bid is financed, confirmations of authority from the Board of directors, time for submitting bid etc
When the bids have been received, it will be possible for KBA to have a conversation with each of the bidders in order to avoid any misunderstandings. KBA will also have a conversation with the owner of the company in order to agree upon the final strategy. If we receive two identical bids, we will either choose one of them or give them a chance to reconsider their bid.
When KBA and the owner have chosen the best buyer, then KBA will draft a Sales Agreement. We can have lawyers from both parties to go through the agreement and point out any problems and make corrections. If the company in question is not very complicated then a final agreement can be reached and signed within a short time.
If the company is of more complicated nature, the purchaser might wish to have a “due diligence” made by his advisers before the final sales agreement is made. In the meantime the parties will have signed a “letter of intent”.
Closing / payment / settlement
The sale has not been concluded before the payment has been received by the seller. The payment can be in cash or in shares. If the payment is made in cash m, then it normal to pay 80-85% up front and the rest within 2 months.
If the buyer is a listed company it may be interesting to take a large part of the sales sum in shares. The condition is however that purchaser has a solid and profitable history with a stable development in their stock price. If part of the sales sum is in shares, there might be room for a higher price at the stage when sales negotiations are being concluded.
Every sale of a company is different as the companies are unique and the individuals have their own preferences dictated by their special experience and background. A sale of a company will roughly follow the stages listed above, but with individual variations.
We will “tailor make” the sale of your company.