Selling a Company Confidentially - Helpful Tips from Sunbelt Midwest

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Sunbelt Midwest's step by step process on giving the right information, at the right time, to the right parties during a business transaction.

Clients are understandably concerned about confidentiality when selling a business. At Sunbelt Midwest, keeping the sale of a company quiet while talking to as many qualified buyers as possible requires a methodical process.

Here’s the step by step process Sunbelt Midwest follows:

1)     Developing a Target List:
First and foremost Sunbelt does our homework asking who should we approach and even consider disclosing to? Who is in acquisition mode? Who has the capital or can secure the money to make this size acquisition? What kind of strategic buyer will see the most value by acquiring our client?

2)     Creating the Blind Profile aka “The Teaser:”
The blind profile is often called the “Teaser.” It provides an executive summary of the business, including Industry and a Financial Summary. This is enough information to create interest. However, it DOES NOT include a name, location or detailed financials or any other information that would allow a party to determine who the company is.

3)     Signed Confidentiality Agreement and Buyer Profile:
Buyers must sign a Confidentiality Agreement (CA) to receive more information. In addition, they need to demonstrate they have the financial wherewithal to acquire the company. If they are a Private Equity Group they will easily be able to show the funds they have raised for acquisitions. Strategic Buyers may be asked to provide their company balance sheet or other proof of funds.

4)     Presenting the Confidential Business Profile:
Once a potential buyer has signed a CA and demonstrated their financial wherewithal, they will be provided the Confidential Business Profile, sometimes also called the Offering Memorandum. The profile provides the company name, history, markets served, a description of products and services, customer concentrations (but no customer names), an overview of operation and other information that will help the prospective acquirer understand the opportunity. Most importantly the profile will detail strengths and growth opportunities that differentiate the company. The profile typically does not contain sensitive information like customer names, employee names, vendor names or other such information.

5)     Due Diligence:
After reviewing the profile we will encourage the buyer and seller to meet. This is an opportunity for the seller to learn more about the potential acquirer, and for the buyer to ask follow up questions about the company, with a focus on operational questions, business model and growth opportunities.

6)     Meeting Follow-Up:
If the “Buyer/Seller” meeting goes well, the buyer will request more detailed financials. This information is provided via an online data room and will include basic financial reports like Profit and Loss statements, Balance Sheets and Tax Returns. It may also include equipment lists, intellectual property information or other schedules. Generally it will not include information such as customer or vendor names.

7)     The Letter of Intent:
The prospective acquirer should have enough information now to make an informed offer through a Letter of Intent. (LOI). If the LOI is successfully negotiated and accepted then, and only then, do we provide more sensitive information.

8)     Due Diligence - Disclosing the Right Information at the Right Time:
Even though we have a signed LOI, it is still vital to provide the right information at the right time. This is in both the sellers and buyers best interest. Multiple buyers are likely to review this information but only one buyer will end up buying the company, so only a limited number of parties need to have access. The buyer should provide a Due Diligence request list once the LOI is accepted. Then Sunbelt will work with the parties to determine in which order this information will be disclosed. Due Diligence that involves Internal matters should happen first, such as Financial, Legal, Operational and Environmental disclosures. Any due diligence for financing should also be handled early in the process. However, due diligence items that involve third parties (landlords, customers, vendors, etc) should be handled last. If a buyer does not want to move forward due to an Internal matter than why do we want them to have more sensitive information? For example, requests to talk to customers should happen only after all other due diligence requests have been satisfied. In many cases we reject discussions with customers entirely and find another way to satisfy the buyers need to confirm that the customer relationships are solid.

At the end of the day, Sunbelt Business Brokers need to provide a reasonable amount of information to make an acquirer comfortable with investing their money. The Sunbelt process is designed to methodically release the right information, at the right time, to the right parties in order to confidentially sell a company.

About Sunbelt Midwest
Sunbelt Midwest is an elite division of Sunbelt, the largest organization of business brokers and M & A professionals in the world. With five offices in Minneapolis, Minnesota; Chicago, Illinois; and Milwaukee, Wisconsin, Sunbelt Midwest is a premier brokerage. The business brokers and M & A intermediaries of Sunbelt Midwest, consistently rank in the top performers of Sunbelt International. Sunbelt Midwest is trusted with coordinating all of the national franchisor relationships for Sunbelt. Because of this interaction, Sunbelt Midwest has a unique ability to market businesses throughout Sunbelt internationally. Sunbelt Midwest truly has a global reach!

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Vanessa Mason
Sunbelt of Milwaukee
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