You’ve spent years building up your Atlanta-based business and now you’re considering the process of selling your Atlanta business. Buyers for Atlanta businesses typically come in the form of private equity buyers or strategic buyers.
As a business owner it can be difficult to discern who the best buyer for your business is. Sure, maximizing value is paramount, but there are other aspects to consider. You have spent years with your team building your business and you want to be sure that the next ownership group will take care of your business and keep the company operating and growing. The process of selling your business can be long and daunting, for this reason when selling your Atlanta business it is smart to consider hiring an Atlanta business broker or investment banker to help you through the process.
Why Should I Hire an Atlanta Business Broker?
Hiring a business broker or investment banker to sell your Atlanta business is a smart decision. After all, this is more than likely the largest transaction you will ever participate in and you want to be sure that you find the absolute best buyer. You only get one chance to sell your business and you don’t want to regret selling to the wrong party and not doing what’s best for your company and your team.
A business broker or investment banker will help you understand the difference between private equity and strategic buyers and will help you determine what the best fit is. Beyond value, there are many considerations when finding a buyer including cultural and strategic synergies.
What is the Role of an Atlanta Business Broker?
Your business broker or investment banker is the advisor that will help guide you and your business through the lengthy sales process. One of the most important attributes of a business broker or investment banker is to help position your business for sale.
The first component of positioning your Atlanta business for a sale is ensuring that your financial statements are accurate and that they reflect what earnings before interest, taxes, depreciation and amortization (EBITDA) would look like in the hands of new ownership. Oftentimes this involves recasting your financial statements to get to the true EBITDA number.
Many business owners run expenses through their businesses that they normally would not when trying to maximize EBITDA. For this reason, many items can be added back to the bottom line to reflect true EBITDA. These expenses include items such as car payments, over-market salaries and nonrecurring expenses. Couple these with adding back all the interest, taxes, depreciation and amortization and you arrive at EBITDA. A buyer will typically want to look at EBITDA dating back three years along with a current balance sheet to get a strong idea of how the company is performing.
Once the financials are ready to present your business broker or investment banker will begin composing the Confidential Information Memorandum (CIM), which is basically the selling document describing your business to the universe of potential buyers. The CIM will include a number of sections covering items such as the core competencies of the business, growth opportunities, strategic considerations, operations, biographies on key team members, organizational chart, industry research, competitors and more. Some business brokers like to compose long CIMs (50-plus pages) while others put together more condensed PowerPoint decks. There is no right way to do it as long as the CIM whets the potential buyer’s appetite to learn more.
In conjunction with putting the CIM together your business broker or investment banker will also be researching your industry to develop a buyer list. They will look at recent transactions to see who the active buyers are and they will ascertain who the large strategic players are in the space that could benefit from owning your company.
They will also identify which private equity groups own companies that would fit well with your business and which generalist private equity firms may want to build a new platform investment strategy starting with your business.
A typical buyer list for a middle market business in Atlanta will have anywhere from 100 to 250 potential buyers on it.
The Selling Process of Your Atlanta Business
After the list of potential buyers and the CIM is complete your business broker or investment banker will begin the process of marketing your business. This will start with an initial blind teaser, which gives enough information about your company for a prospective buyer to consider whether or not they are interested in pursuing the opportunity further. If they respond that they are indeed interested, your investment banker or business broker will forward them a nondisclosure agreement. Once the nondisclosure agreement is in place they will forward the CIM for review.
Depending on your business, the economic climate and the appetite in the market, your investment banker may send out as many 50 CIMs to interested parties. Once the interested parties have had enough time to digest the materials (anywhere from a week to a month) they will follow up with further questions or they will decline the opportunity to pursue further.
The follow-up questions usually take place over a conference call and in many cases the potential buyer will want more detailed versions of the data available in the CIM. This is also your opportunity to learn about the different interested parties and determine which groups you have interest in selling to.
After the conference calls your business broker or investment banker will typically solicit initial value indications from the interested parties. This is a good way to narrow down the serious buyers from the tire kickers. The parties that issue value indications that meet your requirements will typically be granted an in-person meeting. During these meetings they want to ask direct questions about operations and growth opportunities. In many instances they will want to tour your facility so that they can get a true sense for the business.
This is also your chance to really meet the buyers and see if you can imagine them being the owners of your company. How will they be to work with? Do they have a good vision for the future company?
Offers for your Atlanta Business
After the in-person meetings it is time for the rubber to officially meet the road with Letter of Intent. These will be detailed offers that explain value, structure, potential commitments to stay on in a management capacity and variety of other things.
During this period your investment banker or business broker will work closely with you and the potential buyers to negotiate the most favorable terms. Once you’ve reached terms with a party the next step is to sign an exclusivity agreement allowing the potential buyer to perform due diligence on the business without giving any other parties the opportunity to bid on the company.
Due Diligence for your Atlanta Business
The due diligence period is typically 60 days and includes the buyer using outside parties to perform a quality of earnings exam on the financials to that they can be sure all the dollars do indeed fall where the CIM says they do. There will also be technical systems diligence, environmental diligence, ERISA and human resources diligence and more until the buyer is certain that the company is what they are looking for.
In conjunction with the due diligence period attorneys for both sides will be drawing and amending the closing documents to ensure the transfer of the business. Once these documents are completed and signed you’re the company will officially change hands and the process will be complete.
Timing of Selling my Atlanta Business
As you can tell from the paragraphs above, selling your Atlanta business is not exactly quick and easy. The process typically takes anywhere from six months to a year to complete. It can be shorter and it can certainly be longer. The key for you, as the seller, to be certain you are working with an investment banker or business broker that will represent you fairly and give you the best opportunity to meet all your goals.