You’ve given it a lot of thought, and now you’re ready to sell. While there are several things to keep in mind as you start the process of being acquired, a question asked by many sellers is “How long will it take to sell a business?”
Asking this question – and understanding the entire process, timing, and amount of time required – is always beneficial. And often, not having a full appreciation for the time involved– from initial preparation and search to courtship, negotiations, due diligence, and closing – can be detrimental. The selling process can become a distraction for the company and the senior team can lose focus, which can prevent a successful integration.
To stay on track, here’s what to expect when it comes to timing.
Getting started. The first step is to position your business for the sale. This involves working with an experienced advisor to draft an executive summary of your business. This “teaser” and accompanying materials will be made available to interested parties who execute a non-discloser agreement. The process can take one to three weeks depending on how well prepared the seller is.
Identifying interested parties. This can be the most frustrating part of the process and take the longest amount of time. Simply put, you must be patient to find the right acquirer and it may involve reaching outside your comfort zone. Often, buyers may be interested, but they are in flux with other transactions. They may have just completed a transaction and are now tied up integrating two companies. Or they may be in the midst of raising capital, completing a re-org, or getting acquired.
They may pass on the opportunity today citing that “timing is not right,” or it’s “not a good fit at this time.” Then later they might be really interested and hopeful that you’re still available. It’s important not to take this “courtship” personally. There are many moving parts and the process may take up to a year or longer to find the right fit to meet your objectives and your employees and customers’ needs.
Getting to know each other. Once an interested party is identified and mutual interest has been expressed, time is still required for informal due diligence. As a seller, you’ll want to know whether the acquirer understands your business. Do they have enough capital? Do you know their vision? Do they know your vision and desired goals in a transaction? There are several areas to focus your attention during this process. When matching up schedules with the buyer, this could take one to three months or even longer. It’s important to take your time during this courtship phase to really get to know the other party, including on a personal level. This can involve having dinner, playing golf, or doing other social activities.
Making the deal. Once an offer is on the table, time is needed for negotiations, which could take days, weeks, and even months. If the acquirer is experienced, it will still take six to eight weeks to complete the process of definitive documentation, the buyer’s legal and accounting due diligence, the seller’s reverse due diligence, and finally a closing. An experienced advisor can help move this part along in a timely fashion and make sure the lawyers and accountants perform their roles, but do not control or hinder the process.
Selling your business can be an effective way to rapidly grow, expand, gain greater market share, or simply move on to new interests. But getting there requires patience. A skilled advisor can help you make the most of the time and ensure that you are properly prepared.
Steve Pomeroy is the founder of Big Change Advisors, an M&A consulting firm in Los Angeles focusing on middle market companies in the IT services space. Since 1992, Big Change leaders have completed over 36 transactions including M&A, Capital Sourcing, and Public Offerings representing over $800 million in total transaction value. Big Change Advisors donates a percentage of all fees to help serve the homeless through the Los Angeles Mission. To request a free consultant, contact us.