Process

When we are engaged, and how it runs

Clients generally approach us with a situation rather than a defined transaction. Below are the situations we most often act on, and the sequence each one follows, with realistic timelines and what every stage requires.

When do we come in

A decision to sell

The decision is made, or close to it. What remains is how the transaction is run, and that determines the outcome more than most owners expect.

We identify the buyers for whom the business is strategically relevant, approach them deliberately, and hold them within the same window so that terms are set competitively rather than sequentially. The client is also represented by a negotiator with no ongoing relationship to the buyer, which is a material difference from negotiating on one's own behalf.

An unsolicited approach

A direct approach from a buyer is a weaker position than it appears. There is a single interested party, no external benchmark for value, and no alternative should the owner decline. The buyer controls timing, structure, and the information it receives.

Several responses are available, and the appropriate one depends on the circumstances. A discreet market test establishes value before any response is given. Where a wider process is not appropriate, the negotiation can still be conducted on terms the client sets rather than the acquirer's terms. In some cases the assessment is that the offer is sound and should be accepted, which is worth establishing on evidence.

What each of these has in common is a benchmark. Without one, an owner is agreeing to a number they have no means of evaluating.

Sell-side process

Six to nine months from first conversation to completion

Stages one to three establish the position; stages four to six create and hold the competitive tension that sets the terms. Preparation is the part most within the client's control, and a properly prepared process consistently produces a better result than an expedited one, by a margin well in excess of the additional time.

An initial conversation

We discuss the business, the reasons for considering a transaction now, and the outcome the client is working towards. We give an honest view of whether we can be useful and of what the business is likely to be worth in the current market.

What we need from the client

Nothing. No financial information, no preparation, no materials. An hour.

How long

One conversation, occasionally two.

Who becomes aware

No one. Many of the owners we speak to conclude the timing is wrong and no engagement follows.

Valuation and readiness

We review three years of financial information and report two things: a realistic range the business would achieve today, and what is currently suppressing that range.

The second is the more useful. Most businesses carry two or three specific issues that constrain value, and most are capable of being addressed: dependence on the owner, customer concentration, financial records maintained for tax rather than for an acquirer, a key employee without a contract.

Where the assessment is that a client should wait and address them first, we say so.

What we need from the client

Three years of financial statements and tax returns, a customer list capable of being anonymised, and an organisation chart.

How long

Two to four weeks.

Who becomes aware

No one outside our firm.

Preparation

We prepare the materials an acquirer requires in order to make a considered offer: a confidential information memorandum, an anonymised summary identifying nothing, and a normalised view of earnings separating personal and non-recurring items.

The diligence file is assembled at this stage, before it is requested. Documents gathered in good order in month two are an asset; the same documents assembled under pressure in month six are a liability.

What we need from the client

Several hours a week from the client and from whoever maintains the accounts. The care taken here is what keeps later stages orderly.

How long

Four to eight weeks.

Who becomes aware

The client's accountant, generally. One trusted internal colleague where the client chooses.

Identification and approach

We construct the universe of acquirers for whom the business is strategically relevant: strategic buyers already in the field, private equity firms with adjacent holdings, family offices, and funds with committed capital and a corresponding mandate.

Approaches are made on an anonymised basis. Any party wishing to proceed signs a confidentiality agreement before learning the client's identity.

The client approves the list before any contact is made, including exclusions. Competitors the client does not wish to inform are not approached.

What we need from the client

Review of the acquirer list and confirmation of exclusions.

How long

Four to six weeks.

Who becomes aware

Only parties under signed confidentiality agreements, and only after signing.

Indications of interest and meetings

Interested parties submit non-binding indications of interest setting out a value range and proposed structure. We assess them on more than price: certainty of completion carries real economic value and is frequently mispriced by sellers.

The client then meets the credible parties. These meetings carry more weight than most owners anticipate, since acquirers are assessing management's judgement about its own business as much as the business itself. We prepare the client for each of them.

What we need from the client

The client's direct participation, on several occasions. This is not capable of delegation.

How long

Four to six weeks.

Who becomes aware

Only parties under signed confidentiality agreements.

Letter of intent and exclusivity

The client selects a party and signs a letter of intent establishing price, structure and conditions, and granting that party a period of exclusivity.

This is the decisive moment in the transaction and the one most often underestimated. On signing exclusivity, the client's leverage falls sharply. Until that point several parties are engaged; afterwards there is one, and it knows so.

Everything capable of being settled is therefore settled beforehand. Not price alone, but structure: cash at completion, amounts held in escrow and for how long, any earn-out and the conditions triggering it, the treatment of real property, and post-completion obligations.

What we need from the client

Decisions on structure, not price alone. We ensure the client understands what is being exchanged in each case.

How long

Two to four weeks to negotiate.

Who becomes aware

No party beyond those already engaged.

Diligence

The acquirer verifies the position: a quality of earnings analysis, legal review of contracts and corporate records, and in many cases conversations with customers, conducted carefully and late in the sequence.

This is the longest and most demanding stage, and the one in which transactions most often fail, almost invariably over matters that were knowable at the outset. That is the purpose of stage two.

Our role is to absorb the process so the client can continue to run the business. The majority of requests come to us rather than to the client.

What we need from the client

Responsiveness, and continued attention to the business. The most common self-inflicted damage is performance softening while the owner is absorbed in the process, and an acquirer repricing to the softer figures.

How long

Six to twelve weeks.

Who becomes aware

A small number of key employees generally require briefing at this stage, planned with the client in advance: who, when, and what is said.

Completion and transition

The purchase agreement is finalised. Funds flow, escrow is established, and working capital is adjusted against the agreed target.

Communication follows on a schedule the client sets: employees, then customers, then the market.

What we need from the client

Signature, and a plan for the first ninety days.

How long

Two to four weeks to complete. Transition arrangements are negotiated at stage six rather than discovered here.

Who becomes aware

All parties, on a schedule the client controls.

When do we come in

Acquisition search

Proprietary origination in the sectors we cover. We approach companies that are not in a process, where entry valuations are generally more favourable than in a competitive auction.

This requires sector knowledge sufficient to determine which companies merit an approach, and standing sufficient for a founder to take the call. We work from sector maps rather than acquired lists, and we report what we find whether or not it supports the original thesis.

Transaction execution

The asset is identified. What remains is financing, diligence, and the negotiation of terms that hold through to completion.

We arrange debt financing, conduct or co-ordinate commercial and financial diligence, and represent the client in negotiation. The greater part of the value here is identifying in the first weeks what would otherwise emerge late in diligence, at the point where leverage has moved to the counterparty.

Buy-side process

Three to nine months to a signed letter of intent

A search mandate is open-ended by nature; execution is not. The two are run differently, and the discipline that matters most is qualifying out early rather than late.

Mandate and thesis

We establish what a successful acquisition looks like: sector, scale, geography, business model, and the characteristics that matter to the acquirer's existing platform or portfolio.

The value of this stage lies in what it excludes. A mandate that will consider anything produces a pipeline of everything, which is indistinguishable from having no pipeline.

What we need from the client

The investment thesis, return requirements, and any constraints on structure or sector.

How long

One to two weeks.

What it produces

A defined and agreed acquisition mandate.

Sector mapping

We map the universe rather than assemble a list: the companies operating in the defined space, including those with no present intention of selling, with what is known of ownership, scale, performance and likely receptiveness.

Proprietary origination depends entirely on this stage being done properly. A map built from primary work finds companies a database does not.

What we need from the client

Review and refinement of the map as it develops.

How long

Four to eight weeks.

What it produces

A prioritised universe of targets, with a rationale for each.

Approach and qualification

We approach owners directly and confidentially. Most are not in a process, which is where more favourable entry valuations are generally found, and which requires an approach a founder will take seriously.

We qualify interest before the acquirer's time is committed: willingness to transact, realistic expectations on value, and whether the business in fact matches the mandate on closer inspection.

What we need from the client

Availability to meet owners who qualify, often at short notice.

How long

Continuous through the mandate.

What it produces

Qualified conversations with owners open to a transaction.

Valuation and indicative terms

We prepare a view of value on the information available and advise on an indicative offer: range, structure, and the conditions attached.

The structure of an opening offer frequently determines whether an owner engages at all. An offer competitive on headline value but unattractive in structure is declined as often as one that is simply too low.

What we need from the client

Decisions on value and structure, informed by our analysis.

How long

Two to four weeks per target.

What it produces

An indication of interest and, where accepted, a letter of intent.

Diligence

We conduct or co-ordinate commercial and financial diligence and manage the wider adviser group: quality of earnings, legal, regulatory and technical workstreams as the sector requires.

The greatest value here is in sequencing. Identifying in the first weeks the matter that would otherwise emerge late is the difference between renegotiating from strength and renegotiating from necessity.

What we need from the client

Decisions on scope, and timely instruction of counsel.

How long

Six to twelve weeks.

What it produces

A diligence position sufficient to commit capital, and a schedule of issues to be reflected in the agreement.

Debt financing

We run the lender process in parallel with diligence rather than after it, approaching the lenders active in the relevant sector and structure and holding them to a common timetable.

Financing arranged in sequence after diligence is a frequent cause of delayed completion, and delay is where transactions lose their certainty.

What we need from the client

Sponsor information, and decisions on leverage and structure.

How long

Six to ten weeks, run in parallel.

What it produces

Committed terms from a competitive lender group.

Negotiation and documentation

We represent the acquirer through the negotiation of the purchase agreement: price adjustment mechanics, representations and warranties, indemnities, escrow, and any warranty and indemnity insurance.

The economics of a transaction are not settled at the letter of intent. A substantial part of the value is determined in the mechanics that follow it.

What we need from the client

Decisions on risk allocation, taken with counsel.

How long

Four to eight weeks.

What it produces

Executed transaction documents.

Completion and the first hundred days

Funds flow, escrow is established, and working capital is adjusted. We then support the transition: the communication plan, retention of key people, and the reporting required from day one.

An acquisition is priced on a plan. The first hundred days determine whether that plan survives contact with the business.

What we need from the client

A defined integration owner and plan.

How long

Two to four weeks to complete; transition thereafter.

What it produces

A completed acquisition and an operative integration plan.

Failure modes

Common causes of failure

The recurring reasons transactions do not complete, or complete on worse terms than they should, on either side of the table.

The knowable issue

A matter discoverable at the outset emerges in month six, during diligence, when leverage sits with the other party. Unrecorded liabilities, a contract that does not survive a change of control, financial records that will not withstand a quality of earnings review. Most transactions that fail, fail this way, and most were capable of being prevented.

The retrade

Terms are agreed, then reduced during exclusivity on the basis of something found. Sometimes this is legitimate. Frequently it is tactical, and it succeeds because the counterparty is committed and without an alternative.

Deterioration during the process

A transaction is demanding, and attention moves away from the business at the least helpful moment. Performance softens and the counterparty reprices to current trading, correctly. This is the most common avoidable loss of value.

A single counterparty

One interested party, no competitive tension, and terms capable of being accepted or declined but not improved. Whether through circumstance or through a narrowly run process, the client negotiates without an alternative.

Financing arranged in sequence

On the buy side, running the lender process after diligence rather than alongside it is a frequent cause of delayed completion, and delay is where certainty is lost.

The unanswerable question

A counterparty asks why gross margin moved three points in a given year and the answer is not immediately to hand. Confidence in management forms part of what is being priced, and is difficult to recover once lost.

Confidentiality

Disclosure and confidentiality

The most common concern among first-time sellers is that employees, customers or competitors will learn of a transaction before the owner is prepared for them to.

The sequences above are structured accordingly. Acquirers receive an anonymised summary before they receive a name. No party learns the identity of a client without a signed confidentiality agreement. Competitors excluded by the client are not approached. On the buy side, owners approached on behalf of an acquirer learn who is asking only once both sides have agreed to proceed.

At every stage, the parties aware of a transaction are those the client has approved.

Contact

Thirty minutes, without materials or obligation. We will give you a considered view of value, of what is currently constraining it, and of whether this is the right point at which to act.

Where our view is that you should wait, we will say so.