Sell Your Company

Are You Ready to Sell Your Business?

We specialize in selling companies whose current ownership is looking to create liquidity and pursue the next phase of their lives.  Unlike our competitors, we don’t work with every prospective client that contacts us.  We only engage clients who have the commitment  to complete a successful transaction.

That being said, our clients are companies with solid performance and annual revenues and EBITDA greater than $10 and $2 million, respectively.  These are firms possess a financial foundation for the next iteration of ownership to build upon and makes them attractive to institutional and strategic investors.  In some cases a minority partner is needed to inject capital and new ideas into the business.

We do our best to help our clients build future businesses that succeed.  That often means that we seek to help raise experienced capital partners, those who seek to build synergistic entities while building the future.

As the owner or operator of a company you might feel like it’s time to sell your business.  If you think you’re ready to sell, then it’s important to be sure the three factors below are in alignment.  Without these important factors in place, then you may not engage the right partner, or find the best solution for your employees, and you most likely won’t get the best price.

Three Readiness Factors:

  1. personal readiness to sell,
  2. strong business performance,
  3. market readiness.

Factor 1
Personal Readiness

Are you ready to part with your company?  And, if so, at what price?  Do you understand your personal goals?  Are you willing to stay involved with the business but with lesser responsibility? What will you do after the sale?  Will you start a new company or perhaps retire?  Do you need to know that your family is financially secure without the business?

These questions are not easy to answer. And, chances are, you’ve been thinking about these issues in your spare time.  These are life-changing questions and they should ideally be answered before you continue.  The answers to these questions help you determine your goals and without these goals, it’s not as easy to craft a go-forward strategy.

Factor 2
Business Performance

Once your personal goals are formalized and you are personally ready to sell, then it’s time to evaluate your company’s performance.   You will want to review and analyze your business performance over the last three years.  And, you will also need to identify the unique attributes of your business that would appeal to potential buyers or investors.

It is important to view this area in an objective manner and, as an owner, it’s not often easy to do that. But if you take an objective view of your company and its performance and you believe that it is solid and strong, then you are ready for a sale.

In some cases, however, when business performance is not strong or ideal, it will be better to make improvements and hold off on the sale of your company. This provides you time to make necessary improvements and implement changes that will enhance your company’s marketability.

Factor 3
Market Readiness

Once you have determined your personal readiness to sell, and that your business is also ready to sell, then we review the opportunity that exists within your industry.

We have seen dramatic changes in business sectors in the past 20 years. The ebb and flow of the economy and how demand creates new businesses. So it is important to understand the economy and how it relates to your business sector to gauge the level of desirability for a transaction. Through our research and insights into comparable market transactions we can provide market value and timing insights.

This alignment of these three important factors (1) personal readiness to sell, (2) strong business performance, and (3) positive business needs of the market place, all come together, like a “perfect storm”, to result in an optimal selling environment.  If you have all three factors in your favor, then you’re ready to go!  You are ready to capture your future!

You, Your Company, and the Marketplace are Ready,
Now What?

There are many ways in which you can sell your company.  You can go at it alone and ask your network of friends, family and business associates and get very lucky and find a buyer.  Or you can engage a business broker or a Mergers & Acquisitions Advisor.  Or you can hire an investment banking firm to help.  Let’s explore those options.

The first option above, selling your business by yourself, while likely tempting, is not always the most productive.  Yes, you know your business best and can present it to potential buyers, but selling a business is a time consuming process and most owners don’t have the extra time. Further, most owners can create more value by spending time working on the business to keep it in top condition for prospective buyers.

The second option is working with a business broker or M&A Advisor. In our opinion, these are not the best options to provide maximum value in the long run. M&A Advisors function much like a business broker but focus on larger size businesses. They present a sale opportunity as a 100% sale with limited structure options. Often times a M&A Advisor will set and present an asking price rather than exploring the true opportunity and letting the market dictate price and structure.

Business brokers typically focus on smaller, “main street” companies where the owner is a central figure in the business. They function much like real estate agents and utilize simple listing details that only include major metrics like revenue, owner’s income, and the asking price.

The third option –Investment Bankers– do all of the above, but so much more.  Investment bankers present a comprehensive offering of the business to the marketplace.  They seek to truly understand the business and its potential.  They create an Confidential Information Memorandum (CIM) document which presents the business as a whole but also includes information on how the business fits into the current and future market place.  Investment Bankers also contact a range of buyers with similar industry experience.  They work toward the goal of attracting a larger number of potential buyers who present offers with multiple pricing and structure options.

In short, Investment Bankers do more.  The role of an investment banker is to act as your advisor, to help with all aspects of a sale transaction and to provide you with options.  Investment Bankers  are able to manage every step of the selling process for you, the seller.  They do what they do best; find the best deals. Investment bankers focus on the business of selling your business so you can continue to focus on running the business and driving value.

Investment Bankers are also licensed by FINRA, the Financial Industry Regulatory Authority, a not-for-profit organization authorized by the United States Congress to insure that the broker-dealer industry operates fairly and honestly.

John Illes, Founder and CEO of Illes Investment Banking is also a Managing Director with Merit Harbor Capital, a Washington state based investment banking firm. John works with Merit Harbor Capital for all investment banking activities. Together they have many years of experience running and selling small to medium sized companies and they understand what it takes to build an organization.

Why Work With An Investment Banker?

For most people, selling a company is perhaps a once in a lifetime opportunity. It will result in the culmination of your life’s work and may very well be the most important financial transaction of your life. Take advantage of this opportunity and work with experts to market your business.

Investment Bankers specialize in finding smart money, whether for minority or majority investment. That means we help business owners and executives sell their companies to the best fit capital partners.

But more than just selling a company, an investment banker can provide a range of financial options for sellers. These options might include minority sales, recapitalization, majority or control sale, and an outright complete sale of the business.

Investment Bankers also help you understand the buyer’s point of view. This is critical for finding the next leader of your business. An often overlooked reality of the marketplace is that buyers are looking for a foundation for growth. The buyer’s goal is to buy a $50 million company and grow it to a $150 million company. So, the stronger foundation your company presents, the higher value you will receive when selling your business.

Importantly, there must be a process to sell your company. Investment Bankers follow a process and, the team at Illes Investment Banking and Merit Harbor Capital uses a proven process that has worked successfully in the past. It encompasses deadlines and key milestones which are designed to create the best go-to-market plan for your company and deliver as many potential buyers as possible in the current market.  Employing a winning process helps you to capture your future.

The Illes Investment Banking Success Pathway
Sell Your Company

While other investment bankers may have a process to sell a business, Illes Investment Banking has a continuing, evolving and successful process that works well for our clients. This process involves three phases, each building on the others, to provide sale options and choices that are good for you, your company, your employees and customers.

This process is fairly straightforward, but is important to acknowledge and manage.  Our process employs three main phases; (1) Deal Preparation, (2) Active Marketing, and (3) Deal Close.

 

 

 

 

 

The Deal Preparation Phase is our opportunity to get to know you and your company. It’s also your opportunity to get to know us. When we determine that there is a good fit and we believe that we can be successful in helping you to sell your business we proceed together. Phase 1 has two steps; (1) Client Engagement and (2) Market Preparation.

Client Engagement begins with identifying your goals and determining your best options and alternatives. Here we determine the best deal structure for you;  if you wish to sell 100% of your company, if you would rather create liquidity from a minority recapitalization, or if you wish to sell controlling interest and partner with a new capital partner to accelerate growth together. We discuss your needs and identify your goals. The time invested at this stage to clarify your needs and goals will lead us to a more efficient and effective outcome.

In the next step, Market Preparation, we work together to build marketing materials that will attract the best buyers to support your goal. We ask a range of questions and gather information about your company. Sometimes we ask about areas that you take for granted and haven’t thought about in years.

That’s okay. They are important questions that potential buyers will ask, so it’s always better to be prepared and provide good information. We are building the foundation for a transaction, and the quality of the foundation will be reflected in the quality of the final transaction.

Our goal is to present the opportunity in the best light possible to potential buyers utilizing a Confidential Information Memorandum (CIM) deck.

In fact, much of the information gathered at this time will be used again during due diligence. The effort up front allows us to be more efficient toward the end of the process. The Market Preparation step is the foundation for the entire sell side process and the time and effort spent here will pay dividends as we progress into the next two phases. We cannot emphasize enough the value of good and extensive preparation. It really will pay off throughout the process with speed, accuracy and overall efficiency of the deal.

At the end of the Market Preparation step, we will have created a one-page blind company overview, a detailed book (CIM) with historical and forecasted financials, and a broadly focused potential buyer list. Once we have created those marketing materials, we are ready to launch your company into market!

 

 

 

 

 

This is the part of the process that people think about when they talk about selling their company. It is when potential buyers step up and express an interest in purchasing your company. It is the time when they learn a little more about what you have to sell so they can provide you with an offer for your company, one that is reflective of the current market conditions.

It is critical to remember that we are selling your company but your company is NOT “for sale”. We can’t emphasize this proactive and focused mindset enough. Frankly, the biggest mistake that sellers make is not being completely committed and dedicated to selling their company. Being passively “for sale” and playing hard to get rarely results in a successful transaction.

The Active Marketing Phase also has two steps; (1) Market Launch and (2) Deal Review.

When we launch a client into market, we create a Buyer’s List and reach out to everyone on that list. Our goal is to review the opportunity with everyone, obtain market feedback and secure as many executed Non-Disclosure Agreements as possible. In many cases, we’ll identify new potential buyers and, with the Sellers’ approval, we’ll add them to the list to contact and receive materials as qualified.

Our job is to review the Confidential Information Memorandum (CIM) with prospective buyers, answer early questions they may have and gauge the deal fit and the buyer’s capability to execute a transaction. When there is interest by you and the buyer, the next step is a one hour phone call where we share details regarding your company’s history, performance and your future growth opportunities. Remember that we are selling the company and we need to be selling during this and each buyer interaction.

If a buyer remains interested in the purchase process, the next step involves their presentation of an Indication of Interest (IOI), which is an offer with some details regarding the transaction. Since Illes Investment Banking is a boutique investment banking firm, we work with you through all phases and steps of the transaction. At this juncture we also work with the buyers to be sure that their IOI is competitive and relevant. The real value of the IOI is to ensure that the buyer and seller are in alignment regarding a proposed transaction. In many ways, the IOI is the ticket for the buyer to proceed further with the process, including the on-site visit and face to face meetings with you and your team.

We believe there is little sense in meeting with a buyer if the IOI is not in line with the rest of the market or if it is not in line with your expectations.

At the same time, we encourage you to meet with as many groups as possible. This is learning process for all parties involved and, in the past, have been pleasantly surprised by buyers that we might have initially passed over early in the process. It’s important to allow for relationships to build so both you, the seller, and the potential buyer can see a future in exploring any particular deal.

While it is easy to become focused on the transaction value, in many cases the fit between you and the buyer drives the transaction. And, yes, we have had clients pass over the highest dollar offer and take instead “the best fit” offer which presents exciting growth opportunities and other intangible value for the company.

Our goal is to lead a broad, but focused auction to provide you with a range of quality buyer options.

During Deal Review you will see qualified potential buyers present a more formal offer, known as a Letter of Intent, or LOI.

The LOI is where everyone sharpens their pencil. It is important to remember that the LOI is the high water mark for the transaction value and will contain all of the deal points for the purchase documents. It is critical at this stage that the transaction valuation and transaction structure are clearly defined and detailed. Any issues left unanswered during future Due Diligence work may result in a lower transaction value or “re-trading”. All other things being equal, the overall transaction value will remain as stated in the LOI.

It is wise to invest the time and effort at the LOI stage so that the final phase, Deal Close, can proceed smoothly and on schedule.

 

 

 

 

 

At this point you have chosen your buyer and it is time to finalize the transaction. This phase also involves 2 concurrent steps and they are (1) Due Diligence and (2) Deal Completion.

By this time in the process most everyone is excited —-but fatigue can often begin to creep into the equation. It is easy to get frustrated and annoyed with the tedium of due diligence. The work that was completed in the Deal Preparation phase pays dividends now as you are mostly prepared to answer Buyer Due Diligence questions and respond quickly to unique requests. To keep the transaction moving to schedule, we suggest setting milestones for key document and information requests at the start of this phase.

The most important milestone in this step is the closing date. Once the closing date has been determined all other key dates can be established from there.  The absence of key dates and milestones can cause the Due Diligence and Deal Completion steps to drag on and on and on. It’s important to heed the industry saying that “time kills all deals”. We strive to keep a deal on schedule to reach the closing date.

Every buyer will have a wide range of detailed information requests and if most of those requests have been anticipated then there is quality time to focus on the remaining information requests. Again, the preparation helps to minimize the frustrations and manage through the fatigue to reach your goal of closing the deal on time at the valuation and structure agreed in the LOI.

Deal Completion is the final step in the process and it involves the drafting and development of the purchase documents.

We have found it to be extremely helpful to take the initiative and draft the purchase documents early in the process so that you can present them to the buyer. This approach accelerates the process by providing a starting point for the purchase documents to be discussed and finalized.

We recommend that the purchase documents be presented during the LOI negotiation step to allow the buyer to share in your vision for how the transaction can be executed. If a mutual alignment cannot be achieved then, an alternative buyer may be a better solution. Better to find out earlier than later if you are going to have documentation issues with a prospective buyer.

This proactive approach helps identify any conflicts or complications early and provides ample time to find mutually acceptable solutions thereby maintaining the closing schedule.

Note that it is critical for all parties to work diligently to review and provide comments to one another as quickly as possible. Communication between each party’s attorneys is also critical. Neither side can assume that the other side is dong “something” when they don’t see any activity.

Setting and communicating aggressive but achievable expectations helps to keep everyone on schedule for a successful close. Once all the purchase documents and supporting schedules have been agreed, the we can pay all parties.

The transfer of funds is a critical milestone that represents the end of the process. It is important to remember that the deal isn’t completed until the money is in the bank. Sellers and Buyers need to be committed to “putting the ball across the line” to avoid coming up short towards the end. At this point the seller and buyer have successful transaction and the next phase of each everyone’s future can begin.

As with all deal closings at Illes Investment Banking we seek to reward the deal team for their work and efforts throughout the process. Since we stay involved during all the phases and steps described above, we find ourselves glad to have been part of the effort. This is the time that we work with you and your buyers to plan a celebration dinner. So everyone can come together and share in the satisfaction of a job well done, a goal achieved and for you, the seller, the beginning of the next phase of your life.

Why Work With Illes Investment Banking?

It is important to find the right partner to lead you through the process and there are many investment banking companies who can help with this endeavor.  But there are not many investment banking firms that are led by people who have owned and operated companies like you.

John Illes of Illes Investment Banking is not your “typical Investment Banker”. He has lived in your shoes and he has real life business experience.  He held a variety of positions in large Fortune 500 companies, and also in smaller independently held companies.  He has managed and operated companies with over 300 employees.  He has been a Chief Operating Officer, Operations Vice President and Vice President of Marketing.

After turning around and helping to sell a small company based in Las Vegas, NV, John became interested in investment banking.  In 2012, John became a Certified Mergers & Acquisition Advisor  and since then has helped lower middle market companies.

His past experience running companies helps him identify “sticking points” where prospective buyers will have questions.  His experience as an investment banker will help him recommend an appropriate course of action for the long run.

John is also a Managing Director with Merit Harbor Capital, a Washington state based investment banking firm. John works with Merit Harbor Capital for all investment banking activities. Combined they have many years of experience running and selling small to medium sized companies and they understand what it takes to build an organization.

To learn more about how we create sell-side successes, please contact us today. It is never too early to plan for “capturing your future”.  Complete the form below and John Illes from Illes Investment Banking and Merit Harbor Capital will contact you shortly to learn more about your investment banking needs.

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