Four M&A Considerations When Selling Your Business

Once you have selected a buyer and the basic terms have been agreed to, the deal terms and structure are summarized in a non-binding Letter of Intent (LOI), which serves as menu of the key terms for reference by the deal parties throughout the transaction process. After the LOI has been completed and signed, the buyer will undertake an in-depth “due diligence” process, under which the buyer and its advisors will thoroughly examine the company or business being acquired. The buyer will kick over every rock, look at every document, and may want to talk to key employees and customers. The goal for the buyers is to really understand what it is buying and to identify any material risks or concerns.

During the due diligence phase, the parties will negotiate a comprehensive purchase agreement and any related transaction agreements. The purchase agreement will ultimately replace the LOI as the key document for the deal, and, unlike the LOI, the purchase agreement (once signed) will be binding on the parties. This stage involves a great deal of work and will require a lot of your attention. It can be a grind, so it’s important to keep your eye on the prize. Deal fatigue is common at this point.

Ultimately, if everything goes according to plan, the purchase agreement and other ancillary agreements are signed, the deal gets closed, and you’re off and running.

4. The most important takeaway

The key to a successful and less stressful M&A deal is to find qualified and experienced advisors (especially legal and accounting) and assemble your internal team from management. Make sure your outside advisors have meaningful experience working on M&A transactions.

“You don’t go to a general practitioner for brain surgery,” stressed Garth. “If you don’t use someone who really knows the process and what is ‘market’ in terms of what goes into the deal documentation, you run the risk of agreeing to terms that you shouldn’t have, and you may leave money on the table.”

According to KPMG, deal-making activities worldwide could hit a record $6 trillion by the end of the year as businesses continue to embrace cheap financing and the pandemic recovery. The global merger and acquisition surge is set to continue into the new year, so it’s important to be prepared to have these discussions when the time is right for your business.

Ted Schuman is founder & CEO, PlanetOne. Ted founded PlanetOne in Scottsdale, Ariz., in 1992. Under his leadership, PlanetOne has grown into one of the most influential and respected go-to-market business partners in the telecom and IT industries.

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