Our Process: Navigating Business Transactions

Selling a business is no quick event—it’s a process that can take six to nine months or longer. In this episode, we break down the key steps, from preparing for sale to managing due diligence and finalizing the deal. We’ll also answer common questions like how to keep the process moving, why clean financials are critical, and how advisors and attorneys play vital roles. If you’re considering selling your business, this episode is your roadmap to understanding what it takes.

---

TRANSCRIPT:

Welcome to Integrated Insights with ICCG. For more than 30 years, our team has

partnered with small business owners to prepare for and navigate the business

transaction process. Pull up a chair as we share stories and insights from our

experience on all sides of the M &A table.

Hey everyone, thanks for joining us today. My name is Michael. I'm going to be your

host today. I'm joined by Andrew and Mason. Thanks for joining us guys And today

we're going to be talking about Process and do a little bit of Q &A. So guys,

let's start out with how long does it generally take to complete a transaction?

Yeah, I mean every deal is different, but generally takes six to nine months You

know, there's a lot that goes into the deal and that's why it's important to have

an advisor that can keep the deal moving along, but yeah.

- Yeah, I think the key thing that Mason said there was the advisor, right? And

it's not just us, right? There are many people that are involved within a deal,

right? It's not just buyer and seller advisor. There could be a banker could be

attorney could be you know so many different individuals and at the end of the day

it as long as everybody is is on the same page it could be done fairly quickly

and so it's it it does depend on people it depends on I mean it depends on so

much so I mean Mason what's the longest that we've worked for with the with the

client I can't remember well Well, there's one that's been around about as long as

I've been around and it hasn't closed yet. So with our CCD you're alive.

No, I've been here a little like two and a half years. It's been about two years.

I mean, look, it's not just one deal. It's really, It's trying to work with the

client too, right? I think it's preparing and then doing the deal. And so,

but what we tell our clients is by the time you engage us to actually go present

them on the market, it will take a minimum of six months.

- Yeah, I would also add that when we say advisor, that is us, but also lawyers

are important, having a good attorney, because they can hold deals up. They're

notorious for it. So I think it's, yeah, it's good to have an advisor.

It's even better to have a better attorney, so. - There you go, good stuff. So

Andrew, you mentioned that there's quite a few people involved in the process and

that can slow it down, right? Just having a lot of different people there. In

addition to that, though, there are steps to this process, right? It is a process

that we're going through. It's not just a one -time transaction event. What does that

process look like? What are the different steps of a transaction process? - I'll

answer it in two different ways. There's the process before and the process during.

And so, I mean, the process before is planning and prepping,

right? You have to talk through expectations. I mean,

it takes some time to work for us to work through our client's expectations.

It takes, you know, it takes, hey, we've got to see not only financials, we need

to look through the company as a whole or, you know, the org chart, the

organization chart, understanding the culture of the company, we have to understand

the company before we can figure out who is the right buyer. If we're going to vet

buyers for the company, then we have to understand the company because not all the

buyers that we like to work with are

for the company, right? And so we have to understand the company as much as we

can. We may not be auditing them, but we do dive in deep to really understand the

company. And what is that process? So once we go to market the company,

we engage with a client, what happens after engagement all the way through till

closing. Yeah, so once you're engaged and we've done a deep dive into the company,

the financials, that's when we're going to start building out how we're going to

present the company to future buyers. So we're going to create your SEM or your

confidential information memorandum. It's a broad overview of the business,

the history of the business, the financials, the revenue model. And we'll also build

out a teaser, which is just a one pager doesn't give anything like general

information. Yeah, key information doesn't give that. That way we can send it out.

And if they're if somebody's interested, based off of what they've seen in the

teaser, we'll get them to sign an NDA.

And then that's when they're going to get the SIM. So that's the next step is we

build out the marketing material. That way we can send it out to buyers and start

that process. Okay. So and then once they've gotten the SIM,

that's when we get the offers coming in, get to select which offers the best for

the buyer or for the seller. Yeah, I wish it was like that. I do.

I mean, if I will say I have been given the compliment before,

wow, really, I don't have any questions. You guys did such a great job in conveying

all the information that we needed. That was one time that that happened. And look,

I mean, every buyer is different. They're going to look at different things. And

every company is different. And so they're going to they're going to, different

things are going to be needed to be highlighted in the information. And so we,

after the SIM and the financial spreadsheet, we'll say that we send them,

that they review, they come with a list of questions, a host of questions,

if you will. And, and we, it's either through email or over the phone, they will

ask a ton of questions. And that's the time where I know Mason and I love to,

love to say it's our Q and A call, a Q and A time. And the questions come from

us and the answers come from them. And the reason is because that's our time for

vetting. There is some initial vetting that

Um, you know, we, we like to keep in touch with, with the buyers to understand,

Hey, do you retrade? No. Okay. Great. Perfect. All those kinds of things, but we,

we still have to ask them certain questions that are specific to the deal,

maybe, and, um, you know, that, that we, we need to do our due diligence on them,

um, before we really answer their questions. And so we'll spend that time doing

that. And then the last, and then the last of their questions that we've got to

answer. - So we ask a lot of questions, do some due diligence up front, just

through that Q and A like you're talking about. But then we enter into actual due

diligence, right? What does that process look like and how can a seller prepare for

due diligence? It's a long process can be Typically,

you know, the buyer is gonna send over a list of 200 line items of just Important

information that they want to see it's it's not the buyer is not wanting to Try to

find out something negative that's not what they're intent. They want to understand

the business so they can run it Well, so they're to do a deep dive and you're

going to, the best way to prepare is to have everything in order financially,

your corporate documents that you've had over the years,

articles of incorporation, that kind of stuff, just your formation docs.

That's, they're always going to want to see that. If you've had any lawsuits, then

suits, then you're gonna want to, they're gonna want to see those docs. So just

having clean financials, having everything in order, knowing where everything is is

gonna prepare you so well for the due due diligence process. Yeah, I'll,

I'll say the best way to prepare for it, at least for,

for us, right, if when, when, when it's our And I'll tell a client, "Hey,

the best way you can prepare for it is get to know Mason." And at the end of the

day, Mason is going to take that list of 200 items.

But Mason, what's the largest list that you've ever gotten? Yeah, it's 200 something.

200 something, yeah. I mean, it comes in all shapes and sizes, but really you want

to utilize utilize Mason. Mason will set up everything that is needed and will help

get organized so you can send everything to Mason. You can upload it to Dropbox

maybe or however the process is, but send it to Mason so that he can organize it

in the way that he can. That's why we call Mason our due diligence extraordinaire.

So This may be a point for a different time, but having somebody on the inside

that's going to be your go -to throughout the due diligence process,

whether it's your CFO or somebody on your team, just getting them ready,

making them aware of it, I think that will help as well.

- And Mason, you mentioned having clean financials. Andrew, can you talk a little bit

about that? What does he mean by having clean financials?

- Clean financials? Well, that's a great question because we get,

I mean, we get a set of financials. When we ask for a set of financials, we never

know what to what to expect and that's one of the hardest things for us because it

can be disorganized. It could be most blue -collar business owners,

they'll maybe say, "Okay, here's a PDF of that." Well, no, okay, let's make sure we

have to have it in certain ways. If they're using QuickBooks, that's great. We've

actually asked, "Hey, do you want us to help

download the report from QuickBooks?" I mean, we'll go to their office and help them

download it with them. And really, I mean, that's where it's,

I mean, we're not CPA firms. We're not here to clean up your books, but you can

also ask your CPA to help you, and we are there to really display what is accurate

in the company, as in, you know, what is accurate in Quick Books and in the

company. That is key for the buyer, because they have to know what they're buying.

Yeah, Yeah, no, that's great. Yeah, so basically in in some way in some instances

having clean books can be Necessary right the cleanliness can mean that there's stuff

going on that shouldn't be going on there Right, but in other ways it can just

mean really simplifying the process Right for our sellers because if if their books

are clean and we can understand them and we get that version that we can see Where

a number came from we're not gonna have as many questions, right? It should speed

up that process a little bit. That's awesome. Good stuff. So we do the due

diligence in some ways that's where our process can start a little bit, right?

That's at least where our negotiation at least posts that initial agreement up front,

those expectations that we talked about, and that's where that can start. So what

happens after due diligence as far as coming to final terms and moving toward

Yeah, after after due diligence, that's when the fund begins with the asset purchase

agreement or the purchase agreement, whether if it's stock or asset, and so it goes

into the attorney's hands and typically we get to look at whatever the attorney gets

to sends over or we send out whether we're on the buyer sell side, And that's when

we just, you know, hound the attorneys to keep the deal moving along. That's the

next step. - Yeah, I'll even back up further, is that there are some business terms

in there. If we're on the sell side, the buyer's attorney is responsible for

drafting the APA. And once we, if we're on the sell side,

once we get it, we have to review the business terms of the agreement.

I mean, yes, to make sure that it's, you know, it reflects the LOI,

but also that there are some, there may be some

That that that are not in the LOI that that come up in the APA or the purchase

agreement and We have to we have to notify or we have to highlight that and make

sure that we're that our seller is okay with that We'll we'll work with the with

with our clients attorney to figure all that out and You know,

I think That's that's that's really what an advisor should do,

not all advisors do it, but an advisor should be able to look through that prior

to the attorney taking their turn at it. And the reason we do that is to save our

client money on attorney fees is that we've already kind of gotten ahead of the

game in doing

and then even even backing up even further because in between the APA and or the

due diligence and the purchase agreement there might be some okay well hey we have

to clarify we found this in due diligence a buyer may say okay hey that was a

little different or because of this we have to retrade look i'm not saying that

that we have said before, we don't like retrading, and we don't like working with

buyers that retrade. But it can happen, right? It has happened for our clients,

and there are the right reasons to retrade,

but a buyer may just try to retrade. And so We have to negotiate that part and

then they can go ahead and write up their purchase agreement. There's this

negotiation there that happens again.

Once you get past that, hopefully, the odds are higher that you can close the deal.

Earlier, you mentioned NDAs. We do those a couple of times throughout the process,

both when we're bringing it to market and when we have a potential buyer, at least

when we're working on the sell side. So, how does that NDA,

how do the processes that we put in place protect the confidentiality of our

clients? Yeah, that's a great question. I would say, well,

NDA non -disclosure agreement is, well, it's as good as the two people that signed

it, right?

But even with an NDA, there are still things that we won't give out,

right? And at the end of the day, we have to be good stewards of the information

that we have. And So the timing and the extent of what you give and how you give

it is incredibly important because the buyer has reasons for wanting to see certain

things and you have to sometimes delay giving the full details while satisfying the

immediate need of the buyer. Right and so there are, I mean we have to protect,

we have to protect our client.

And so I know there are certain things that we just have to wait and give out.

Yeah. I'd say the two biggest things are the customer names and then employee names.

rule of thumb has been until, until they start spending money on legal, then we're

not giving it. Um, and I just, I don't want to put the business owner in a bad

position to where if it's a, if it's a competitor or if they're in the same space

that they're going to come and try to poach employees, whatever it may be, I just

don't want to do that. So, um, general rule thumb is

until they start spending money, not getting the information. - Yeah, and I would

also add, it's not just name, it's pricing. - Yeah, pricing too, that's a big one.

- If you give out the pricing, not just for your customers, but also maybe the

salaries.

I mean, we've seen before where people go around and they'll,

you know, there may be a non solicitation in there, but they're still, they're

still, uh, um, hey, look, he's wanting to sell. Come, come work for us,

you know, and I can pay you X amount and knowing that that's higher than,

than what they're getting there. So we have to, um, protect the,

our client from those things and, and there, there's the right time for everything,

right? There is a right time to share information, but you have to pick the right

time. - Yeah, going back to the NDA, I would say what it also protects is word

getting out to employees or customers, they find out about the deal early on.

And either employees confront the owner or they start talking and it puts the deal

in jeopardy. So that's another reason why the NDA signed. Along the same line,

if competitors find out, it is detrimental because if Mason's selling his company and

I'm a competitor and I find out, I'll go straight to his customers and say,

"Hey, so -and -so, there's gonna be a change. There are gonna be changes. You might

want stability. Come to me." And that is something that we have to protect our

clients from. - So negotiations come to a close, moving toward closing,

right? Sign those documents, fireworks, everybody's happy it happens. Talk about post

-closing a little bit. How does what we do as advisors at ICCG, how may that look

different than working with another advisor in M &A? Yeah, I mean, I think you just

continue to hold their hand just through the transition period of, you know, there

are things like working capital, it's, you know, cutoffs and all that kind of stuff

that needs to be calculated post close. And so we just we continue to hold their

hand for, you know, as long as they need, but Making sure that the transition does

go smoothly. So Andrew if you want to add anything feel free Yeah,

you know one of the things that has been a privilege for us is that sometimes we

get to There's gonna be some transition a transition period for them that they have

to stay with the company for three six months or Five years or you know, whatever

that looks like And in the privilege that we get is that they end up having this

retirement party at the end, and we're invited, right? And I will say it's not very

common, but we have been a part of this process to help them towards that, work

towards that, and we get to celebrate. And so one of the biggest reasons why we

get to be there is because we're a part of that transition. And There is,

like you said, working capital true ups and all of that, I think we check in after

a time to say, "Hey, how are you doing?" Because it's an emotional process and they

need to talk to somebody. And so, yes, the whole,

this It's a business thing and we make sure everything is all organized and it's

done the way it should, but at the end of the day, what about how they're feeling

after they've just basically stopped doing what they've been doing for 30 years,

right? And so it is an emotional process that we come in and check in and And so

we it's it is key for us to to have that relationship with them to make sure that

they're They are and they're processing it in the right way The last the last thing

I'll say about that whole about about after the acquisition is is on the sell side,

right? Our clients, they will make sure that they have somebody like a wealth

manager, financial advisor that they will probably have already met with,

but even if they haven't, we'll make sure that we can sit down with them and

introduce them to a

a wealth manager and figure out just based on their goals, what they want to do.

And so that's an emotional process in itself. And so we try to hold their hand

through it. - Well, to our listeners, I hope that episode has helped you to get a

really good idea of the M &A process and what that looks like walking through it in

the timeline. And thank you so much for joining us today, Andrew Mason. Thank you

for being here. That's all the time we got for today. And that wraps up another

episode of Integrated Insights with ICCG. Be sure to subscribe and stay tuned for

more stories from our team. We love hearing from our listeners. If you have any

questions or topics you'd like us to cover, please send us an email in the show

notes. For more information about ICCG, please check us out on our website or follow

us on LinkedIn and YouTube. Until next time, there's always a seat at our table.