The Mergers & Acquisition Process

The Mergers & Acquisition Process

Sell Side Engagement FAQs

When is the best time to sell my business?

The best time to sell your business is a few years from the inception of the company and ideally while it is growing. It is more likely to achieve a premium valuation if going to market during an upward trend.

How long will it take to sell my company?

The process of selling your company typically spans 4-6 months on average from marketing to close. It usually takes us 4-5 weeks to receive offers on your business. The due diligence process and Change of Ownership (CHOW) can take up to 4 months.

If I agree to sell my company with your firm what happens next?

We will send you a Fee Agreement (FA) with a preliminary valuation and engagement terms. Once you sign the Fee Agreement, we begin a three phase M&A process – click here to download our pitch deck for an overview.

What is a Change of Ownership? (CHOW)

A CHOW is a Change of Ownership where the buyer is officially approved by the state, CMS, or governing body to legally take over your business.

Can I continue working with the business after a sale?

Typically, this can be negotiated into a transaction as a condition of closing. We can secure your position through the use of rollover equity, an operational agreement, and/or an employment agreement.

Can I retain equity?

Yes, especially when your company generates in excess of $1 million in adjusted EBITDA. This is also known as a recapitalization. The equity you maintain with a new partner/owner is considered Rollover Equity. If debt is involved in the transaction, your rollover equity will yield you more ownership post close.

What is recapitalization?

Recapitalization is the process of changing a company’s debt to equity ratio, by either adding more equity to its capital or adding more debt (debt recapitalization). It involves exchanging one form of financing for another. It can fund growth, provide liquidity, or buyout a partner.

Am I paid in full at closing?

Typically, 90% of the total purchase price is paid in cash at closing. On average, 10% of the purchase price is withheld for a period typically spanning 12-18 months. It is kept there as a security against indemnification and reps & warranties (See Reps & Warranties).

What happens to my cash and Accounts Receivable after close?

Generally, you as a seller will retain cash and cash equivalents at closing. Working Capital generally includes Accounts Receivable less Accounts Payable. This is sometimes negotiated as a way for the buyer to acquire the company and maintain the normal course of business during the transition.

What is Working Capital? What does True Up refer to?

Working Capital is Short Term Assets Less Short -Term Liabilities and Debt. Buyers want to keep your working capital. We do our best to avoid this and negotiate that the seller retains all or most of it. If net working capital is negotiated, we establish a figure based on what the company needs to float the business for a short time. Post close, the working capital number may be higher or lower than initially calculated. Seller will keep the excess over the amount or pay the buyer for any shortfalls. This “True Up” usually happens 90 days after the deal is funded.

What happens to my debt after close?

You, as the seller, are responsible for settling all debt on the business.