Find a Target
It’s likely you have been thinking of expanding your business portfolio for a period of time before you are ready to act. When you are ready to find a business to acquire, you need to explore your options.
The easiest place to start is your own network. Reach out to find out if anyone is retiring or looking to sell or even work with a business broker to find the ideal target. If your own network doesn’t bring you a result, you can consider reaching out to a professional in your sector, or even looking to your competitors – would they consider joining forces?
Business Valuation
Once you have identified a target, a valuation can help you feel comfortable that you are not overpaying for the intrinsic value of a business. The accuracy of financial reporting is crucial at this stage as it will be the fundamental basis of all negotiations going forward. Our team of Chartered Business Valuators (CBVs) will help you properly vet potential businesses, their operations and financial reporting and understand the potential price range that you might be willing to apply.
Letter of Intent/Offer
Once you have the information from the valuation and are ready to take things to the next stage, a Letter of Intent, often referred to as an “LOI”, is issued. A Letter of Intent is a non-binding proposal (in the form of a letter) that sets the framework for a potential transaction, typically provided in the early stages of negotiations. It often contains a price, timelines for meeting agreed upon milestones, and may include additional details pertaining to the execution of the transaction. We can work with legal counsel to ensure that the LOI is properly drafted from a financial perspective and accurately reflects the proposed structure of the transaction.
Due Diligence (Quality of Earnings)
For over fifty years we have been helping businesses that operate in a wide array of industries. When you work with us in completing due diligence at the early phase of a merger or acquisition, you will have a team of knowledgeable professionals assisting you in determining:
- Order of magnitude of pricing relative to value
- The sustainability of the target company’s cash flows used in valuing the business
- If corporate assets have been documented and reported accurately (assets and employees)
- The possible existence of unrecorded corporate liabilities
- The income tax exposure with tax authorities
Purchase Agreement
A purchase agreement is a formal contract or an agreement that outlines the terms and conditions pertaining to the business purchase/sale. The purchase agreement can be a share purchase or asset purchase agreement with the main difference being a purchase of the shares of a company versus purchasing the individual assets of the company.
The purchase agreement will clearly set out what is being sold/purchased, the determined purchase price, and any other warranties and representations within the transaction. In addition, there may be other necessary agreements that need to be completed in order to implement the transaction (i.e. employment agreements, non-competition agreements, etc.)
This area is also where we work collaboratively with legal counsel to ensure that the financial aspects of the transaction are properly reflected in all of the required legal agreements and documents.
Post-Closing
After the transaction is closed, there will often be areas such as confirming the closing date financial figures and dealing with any required adjustments to the purchase price as detailed in the purchase agreement. Our team will work with management to validate these areas and communicate with legal counsel on any issues that arise after the transaction has been completed.
Closing
When it comes to any purchase and sale needs the team at SB Partners can assist with every step of the transaction.
