Most successful business owners have been approached about selling their business at least once. Yet to maximize shareholder value, selling to the unsolicited bidder usually will not yield the highest price. After years of building a successful business it seems unwise not to invest the time and effort to discover what the full range of options are to maximize shareholder value. You will only sell your business once so it is important that you do it right. KeySource Commercial Bank’s experienced investment banking professionals use a disciplined approach to selling businesses which results in maximizing shareholder value.
This approach begins with understanding the business, its products and services, markets, competition, industry, growth opportunities, management, ownership, and risks. Based on this analysis a range of values and most likely exit outcomes are examined. Discussing these findings with the shareholders will result in a plan of action that fits the needs and desires of the shareholders.
If a sell transaction is the decision, KeySource will put together a comprehensive information memorandum that puts the company’s information in a factual but favorable light. An exhaustive list of potential buyers is presented to the seller for permission to contact on a confidential basis. The potential buyers are only permitted to see high level information without disclosing the business name to determine if they are interested enough to sign a confidentiality agreement.
After signing such an agreement, interested parties are sent the entire information memorandum. All parties receiving the memorandum are given a period of time to review the material, ask questions, and submit a letter of intent indicating their offer for the business. After reviewing the information, asking for clarification, and analyzing the numbers, the offers are presented to the seller. Through additional negotiations with the top bidders the seller selects on an offer that provides for not only the highest price but the best terms and conditions for the seller. Once a letter of intent is signed with the chosen buyer, due diligence is completed and a Purchase Agreement is negotiated and signed. KeySource professionals coordinate the closing process including the attorney, accountant, consultants and regulatory issues to ensure a successful sale. The whole process can take 60 to 120 days from start to finish.
Often business owners find themselves in a position such that it is better to grow the business through acquiring than grow internally. In these situations it is important to have a well defined strategy for these target acquisitions. Since most business owners are not experts in mergers and acquisitions, it is important to hire professionals that can avoid the pitfalls that exist in this process. It is difficult for the business owner to be as tough a negotiator as is warranted knowing that the existing owner's cooperation is necessary to a smooth transition.
Therefore it is often preferable to have an outside investment banker play that role. In addition, in an industry with few competitors, it is important to keep confidentiality about who is an acquirer. The investment banker can find potential sellers without disclosing who the buyer is until confidentiality agreements are signed and there is strong indication that the company might sell.
KeySource professionals will work closely with you to assess your ability to acquire companies and develop a plan to pursue targets. Once a plan is agreed upon, we will contact targets on a confidential basis to promote a compelling rationale for a transaction. After finding a willing target we will evaluate the business value, synergies, and risks, helping you structure the transaction. We will also help determine the best source of financing for the transaction.
As a bank, the professionals of KeySource Commercial Bank are uniquely qualified to understand the debt markets and the structural requirements to ensure a successful placement. Senior debt transactions are structured with the bank first and then syndicated with a network of community banks to accomplish any size facility.
Often a company has growth opportunities that exceed its senior debt capacity, but that will provide excellent long-term cash flow and shareholder value, or a business owner may want to diversify the concentrated risk of stock in the private company with a partial liquidity transaction. Both of these needs can be met with subordinated debt repaid with the company’s cash flows.
Subordinated debentures, or mezzanine debt as it is sometimes called, is typically subordinated to senior debt with interest only payments at higher interest rates with warrants attached. There are numerous sub-debt funds that seek to fund companies in certain industries. KeySource investment bankers will prepare a detailed information memorandum, identify the appropriate mezzanine funds, solicit their interest in the transaction, and negotiate with each party to find the most suitable lender. Once a commitment letter with a mezzanine fund has been signed, KeySource professionals will handle the coordination of closing and seek to resolve issues as they may arise.
KeySource Commercial Bank arranges interest rate swaps, caps and floors for clients who want to minimize their risks related to interest rate fluctuation.
The true value of any business is the price a willing buyer and a willing seller agree to, provided that neither party is under any compulsory need to do so. This is why the highest value for a business can be obtained through the process of creating an auction with multiple interested parties. In order to know beforehand that you are in the right range of values when pursuing a sell or purchase, a formal business valuation can frame the expectations. Each industry has its own multiples or norms for calculating value although there are numerous factors that need to be taken into consideration. Historical performance, growth opportunities, market position, industry risks, management quality, and owner compensation are a few of the factors that need to be taken into consideration in valuing a business.
KeySource professionals have valued numerous businesses in many different industries and are fully qualified to provide business valuations. They combine a strong understanding of financial theory, in-depth industry knowledge, experience in capital markets, and the ability to identify and quantify significant off-balance sheet assets and liabilites. These abilities help ensure that you get the accurate valuation you need whether it is for a sale, purchase, buy-sell agreement, or recapitalization.
