This blog will give you an overview of the ten steps involved in a quality sales process. Taking you from valuation to company disposal with minimum pain along the way.
To ensure the process to sell your consulting business runs smoothly and to mitigate any risks, as well as maximising the value of your firm, adequate planning and preparation is the key.
Initially, establishing a comprehensive strategic plan is essential to align all necessary elements to successfully achieve your transaction goals.
Those elements should include:
Our sell-side strategic review process assesses the risk factors that may cause problems or affect the maximum value. Once identified, you can put a plan in place to mitigate or eliminate the risks and maximise the value of your firm in the process.
Ensuring there are sufficient resources to manage business-as-usual activities and the ongoing growth of the firm, in addition to the sales process is another vital step. Failure to do so may cause delays in the sale or reduce the initial price of the firm. It may be beneficial to employ advisors at this stage to reduce the management load of the sale process.
Using the intelligence from your team and your M&A advisor to sell your consulting business, form a list of 40 or more potential bidders/buyers who may be interested in acquiring your consulting company. Categorise the list into groups based on a view of their potential synergy with your firm to effectively sell your consulting firm.
Your M&A advisor will be required to collect and produce the appropriate documentation in preparation for the sale of your firm. This comes in five forms:
Engage lawyers and tax planning experts early to minimise or avoid any issues that may impact on organisational structure and remuneration, contracts, shares, liabilities or company incorporation. Your M&A advisor will be able to recommend a trusted expert if you don’t have access to one.
With all prior background work completed to sell your consulting business, you can now start contacting your buyer list to begin the sales process. As an initial step, send out the Blind Profile then follow up with a phone call or email to establish interest and pre-qualify buyers as you move forward to sell your consulting firm.
Before progressing to detailed discussions, interested buyers are invited to submit indicative offers.
This early step allows you to gauge the seriousness and financial capability of each potential buyer without committing to any single party. Upon reviewing these indicative offers, select a shortlist of buyers who present the most compelling terms for management meetings.
The purpose of these meetings is twofold: to impress upon the buyers the value and synergies your firm offers, and to further assess the buyers' commitment and fit. This approach ensures that only the most suitable and serious buyers proceed to the next stages, enhancing the competitive tension and potentially the value of the offers.
Following the management meetings, invite the shortlisted buyers to submit their second-round offers, providing them with an opportunity to adjust their bids based on the insights gained during their interactions with your team. This step not only refines the pool of potential buyers but also maximises the value of their offers.
Simultaneously, prepare for the due diligence process by gathering necessary documents and information. This preparation is crucial for a smooth and efficient DD process. However, maintain engagement with multiple buyers during this phase to ensure competition and keep options open until you are ready to move to exclusive negotiations.
Upon reviewing the second round of offers, select the most favorable buyer to grant exclusivity. This decision should be based not just on the financial offer but also on the buyer's strategic fit and the likelihood of a successful transaction. With exclusivity now granted to a single buyer, proceed with the final due diligence process.
This exclusivity phase is where the buyer thoroughly examines the financial, legal, and operational aspects of your business. Given the competitive process up to this point, exclusivity is a commitment from both sides to work towards finalising the sale. During this stage, your lawyer will draft the Sale and Purchase Agreement and related documents, ensuring that all terms agreed upon are accurately reflected.
In an environment where competitive tension has been successfully fostered, encouraging pre-emption becomes a key strategy to sell your consulting business. This strategy involves a buyer presenting an offer that is so compelling in terms of price and/or structure that it effectively 'knocks out' other potential bids, showcasing a proactive approach to sell consulting services.
Encouraging pre-emption not only serves to potentially increase the sale price but also demonstrates a buyer's commitment and confidence in the value of your business. It is a clear signal of their desire to expedite the process, reducing the time and complexity involved in dealing with multiple parties.
This approach requires a delicate balance, as it involves weighing the benefits of a quick, premium offer against the potential value of a more drawn-out competitive process. However, for sellers, the prospect of a pre-emptive bid can be particularly attractive, offering a faster route to sale completion with potentially fewer complications.
If you have any questions about this process, start a discussion with our Equiteq chatbot. Our experts will respond to any of your comments or questions.
This article was updated in March 2024, and was based on an original blog post published in 2014.
