In the Selling Process, 
                                             the Shorter the Timeline, the Better

In the selling of any business, especially in times of a volatile or uncertain economy, speed is of the essence.  Faster is always better, and can radically improve the likelihood of success.

The total process of selling a business can take anywhere from two months to two years. Two months is unusual in the extreme, and requires aggressive buyers in hand at the outset and a willingness on the part of the seller to settle for nominal investigation of possible competitive bidders. On the flip side, two years is extremely slow, and generally would indicate a serious problem.

A reasonable timeline would be six to ten months. The first two to three months are generally required to gather information about the company for presentation to buyers and, at the same time, to identify and research who the best buyers may be.

Information to be presented needn’t be pulled to an elaborate bound-book format in this process. In fact, we recommend strongly against any printed material that cannot be easily updated and revised as the process evolves. However, material does need to be accurate, professional, and presented in a way to clearly set forth key elements to the deal that makes the opportunity attractive to buyers. The package of data which you give to buyers is a selling piece, albeit very soft sell.

With respect to buyer search work, the temptation to rely on old biases and assumptions about possible buyers makes it difficult for anyone heavily involved in the company to gain adequate distance to think most creatively. Also, the time to do a quality job in buyer search is extensive. Hired help is worthwhile, to try to contract the timeline somewhat, but in any and every case, this is time well-spent.  Solid competition can make an enormous difference in deal velocity and resultant likelihood of success.

After information is well developed and you are ready to launch, the early contact stage can be expected to take about another two months. For any given buyer prospect, it make take anywhere from one to ten days just to get the confidentiality agreement signed, depending on whether or not the buyer requires advance legal review before signing. Although our firm generally uses a very straightforward one-page document for this, we have at times had to deal with longer, more complex, formats due to a client’s attorney preference, resulting in a longer timeline.

From signing of the confidentiality agreement, it will typically take several more weeks to get the buyer the first phase of information, and for the buyer to consider their initial interest level. The faster that buyers return to you with eager requests for further data the better. Detailed questions are a good sign of real interest.

By the time you get to the stage of explicit response to buyer questions, you’re likely to be at the three- to four-month mark. When you have a nice mix of interested parties and you have provided them with solid information, it is time to call for bids. Best buyers should, by this time, be fairly far along in their thinking and able to establish price quickly. Bids can generally be requested with as little as a week’s notice, if all is in place.

When bids are received, it is prudent to select more than one party to with which to continue discussions. Next-phase actions will include invitations for tours of facilities, and meetings with the CEO or owner. Arranging such visits will probably take several more weeks, but, if all goes well, you will then be set to enter into a Letter of Intent with your chosen favorite, or move directly toward the Definitive Purchase Agreement. It shouldn’t take more than a few weeks to negotiate the formal Definitive Purchase Agreement, and not more than another sixty to ninety days to complete the due diligence and close.

Regarding the overall timeline, keep in mind that faster is ALWAYS better. A hundred things can go wrong and foil the sale. A handful of things WILL go wrong—inevitably. They have to be fixed, and fixed again, to stay on track. The tighter the time frame, the less opportunity for fate to introduce new challenges to your successful completion of sale.
 

Written by Deborah Douglas, Managing Director of the Douglas Group, a St. Louis-based private investment banking firm which represents sellers of middle-market companies. Ms. Douglas is also author of "Cashing In!"  For more information, contact her at ddouglas@douglasgroup.net or call 314-991-5150.

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