The Art & Science of Selling a Business

Course Outline

• Introduction [25:07]
  • Lessons from Turnarounds and Publicly Traded Companies
  • Entry into Private Equity and Lessons Learned
  • Importance of Understanding Both Sides of the Table
  • Common Mistakes Made by Sellers
  • Goals for the Course
• Lesson 1: Deciding to Sell [01:53:59]
  • Deciding to Sell: Emotional and Practical Factors
  • Objectives in Selling a Business
  • Strategic vs. Financial Buyers
  • Case Studies: Successful and Unsuccessful Transactions
  • Exit Planning Process
  • Value Drivers in Exit Planning
  • Preparing Financial Statements
  • Customer Base and Market Analysis
  • Personal Relationships and Customer Loyalty
  • Due Diligence and Quality of Earnings
  • Financial Due Diligence for Financial Buyers
  • Operational Due Diligence for Strategic Buyers
  • Communicating the Sale to Employees
• Lesson 2: Managing Employees’ Expectations [01:05:42]
  • Managing Employee Expectations in M&A Transactions
  • Deciding Whether to Inform Employees 
  • Impact of Employee Involvement on Due Diligence
  • Timing and Strategy for Informing Employees
  • Handling Employee Reactions and Emotions
  • Role of Key Management in the Transaction
  • Strategies for Effective Communication
  • Introducing the Buyer to Key Employees
  • Retention Bonuses and Stay Bonuses
• Lesson 3: How Private Equity Firms Work [01:08:10]
  • Understanding Private Equity vs. Public Equity
  • Structuring Private Equity Firms
  • Fund Operations and Lifespan
  • Importance of Professionalism and Due Diligence
  • Co-Investment and Fee Structures
  • Differences Between Private Equity and Venture Capital
  • Focus and Specialization in Private Equity
  • Types of Investments and Recapitalization
  • The Investment Funnel and Due Diligence
  • Valuation Methods and Transaction Structures
  • Support and Expertise from Private Equity Firms
• Lesson 4: Valuation [36:09]
  • Valuation Methods for Middle Market Businesses
  • Understanding EBITDA and Its Calculation
  • Normalizing Financial Statements and Add-Backs
  • Good and Bad Add-Backs in Valuation
  • Factors Affecting Business Valuation
  • Transaction Structures and Their Impact on Value
  • The Due Diligence Process and Maximizing Value
  • The Importance of Annual Valuation Check-Ups
• Lesson 5: Building Your Deal Team [42:55]
  • Building Your Deal Team: Introduction and Initial Roles
  • Finding and Retaining Key Team Members
  • Financial Advisor and Legal Representation
  • Attorney Selection and Fees
  • Accountant’s Role and Financial Preparation
  • Collaboration Among Team Members
• Lesson 6: Buyer Types [55:04]
  • Introduction to M&A University and Course Overview
  • Wealthy Individuals as Buyers
  • Strategic Buyers and Synergies
  • Advantages and Disadvantages of Selling to Strategic Buyers
  • Private Equity Firms as Buyers
  • Direct Competitors as Buyers
  • Family Offices as Buyers
  • Employee Stock Ownership Plans (ESOPs) and Management Buyouts
  • Breakdown of Buyer Groups in the Middle Market
• Lesson 7: Exploring Your Options [35:50]
  • Exploring Growth Options for Businesses
  • Debt Financing and Its Implications
  • Equity Options: Venture Capital and Angel Capital
  • Growth Equity: A Suitable Option for Middle Market Businesses
  • The Private Equity Toolkit
  • Sales and Growth Drivers in Private Equity
  • The Cash Cow Exit Strategy
  • Mergers: A Rare Option in the Middle Market
  • Outright Sale: Selling 100% vs. Less Than 100%
  • Framework for Decision-Making
• Lesson 8: Letter of Intent [49:29]
  • Introduction to M&A University and Letter of Intent
  • Length and Content of LOI and Purchase Agreement
  • Process from LOI to Closing
  • Information Provided Before LOI Acceptance
  • Key Clauses in a Letter of Intent
  • Legal Components and Escrow
  • Governance of the Letter of Intent
  • Seller’s Ongoing Role in the Business
  • General Terms in a Letter of Intent
  • Negotiating Tips for the Letter of Intent
• Lesson 9: Due Diligence [35:11]
  • Due Diligence Overview
  • Data Room and Involvement in Due Diligence
  • Financial Due Diligence
  • Operational Due Diligence
  • Legal Due Diligence
  • Preparing for Due Diligence
• Lesson 10: Transaction Structure and Closing [39:45]
  • Transaction Structure and Consideration
  • Components of Consideration
  • Rollovers and Employment Agreements
  • Escrow and Debt Assumption
  • Legal Structure and Tax Implications
  • Negotiating the Purchase Agreement
  • Key Clauses in the Purchase Agreement
  • Reps and Warranties and Due Diligence
  • Run-Up to Closing and Closing Process