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Is now the time to sell?

Consider the 4 P’s of a Successful Transition Process

There’s a well-known saying, “A rising tide lifts all boats,” suggesting as improvements in the general economy occur so will the fortunes of those who – both directly and indirectly – participate in said economy.

On September 20, 2018, the S&P 500 and the Dow Jones Industrial Average hit their highest point, ever (as of the writing of this article). What does that mean? For one thing, hopefully your 401k or alternate retirement vehicle is performing well. It also means companies, notably U.S. companies, are currently valued at one of the highest points in history.

There’s another well-known saying, “Buy low, sell high.” As a small business owner, is now the time to exit? Consider the 4 P’s of a successful business transition as you contemplate your business succession strategy and whether now is the time to sell.

The 4 P's of a successful business transition: Partner, Plan, Promote, and Purchase


Selecting your transition team will set you up for success as you navigate the road to a successful business transition. Having experienced accountants, legal counsel, and business intermediaries/brokers will help to ensure a smooth process and transition. As you contemplate selecting your accountant/business intermediary some things to look for in selecting representation include:

  • Industry experience and expertise
  • Knowledge of the M&A market, transaction pricing, and market participants – This is critical in the partnering process as a knowledgeable intermediary will be able to facilitate the identification of potential financial and/or strategic buyers in order to maximize the transaction price for the seller. Synergistic buyers are oftentimes in a position to pay a premium for a target company as they have the ability to extract value from the target through several avenues including but not limited to:
    • Consolidation of operations into existing portfolio companies and/or related entities to eliminate excess capacity from an industry/market
    • Create marketing opportunities for the target’s products and/or services
    • Execute on strategies to maximize skills or technologies more rapidly or at lower cost versus what the target is developing internally
    • Pick winners early and help them develop their businesses
    • Synergies are typically realized in any one of the following categories (or some combination thereof): revenue enhancements, core competencies and/or skill sets, technology and process improvements, product/service line diversification and risk reduction, cost reductions, and financial economies of scale.
  • Trusted Advisor (responsive, caring, advocate), acting with integrity and professionalism


Just as you would with your house, with the help of your realtor, you will want to spend some time with your Advisor to help you understand what your business might be worth. Be prepared to discuss the marketing strategy for your business and all of the operating history related to your company. Also, be prepared to execute a listing agreement. The final deliverable from the planning phase should be a Confidential Information Memorandum (CIM). The CIM is a marketing/information piece for your company and will include such things as:

  • Industry & Company Overview – Summary of the industry, current outlook, and major market participants. History of operations, summary of current ownership, legal structure, etc.
  • Business Operations – Summary of product or service, overview of customers, business infrastructure, management structure, and summary of owner and employee responsibilities
  • Revenue Profile – Summary of how your company generates revenues
  • Customer Profile – Summary of your typical customer
  • Growth Opportunities – Market opportunities your company expects to take advantage of, or investments in the business to fuel growth into the future
  • Financial Review – This will provide a historical snapshot of your company’s financial performance over a period of time (typically 3 – 5 years)


It is the business intermediary’s role to identify and evaluate potential buyers for your business but perhaps no one is more suited to help identify prospective buyers than you, the business owner. Confidentiality is paramount before releasing any information, including the CIM. All prospective buyers should be expected to sign a non-disclosure agreement (NDA) and only the necessary parts of the package will be released until the Advisor knows they are a viable candidate to purchase your business. The CIM can also be valuable in getting your business pre-approved for lending.

Marketing strategies leverage the Advisor’s vast network of like-minded entrepreneurs, private equity firms, and investment bankers to source potential buyers for your company.


This is the fun part yet just the beginning of the end. Once a prospective buyer is identified you should expect a non-binding letter of intent (LOI) from them. The typical LOI is:

  • Non-binding, with exception of confidentiality, exclusivity, fees, governing law, etc.
  • Contemplates structure of transaction and consideration
  • Considers Principal terms of the deal
  • Subject to a negotiated definitive agreement
  • Might address employment arrangements with key employees
  • Considers timing/milestones (e.g. due diligence, financing, employee interviews, final purchase agreement)
  • Confidentiality (could refer to existing NDA or set out new terms)
  • Offers exclusivity to the potential acquirer
  • Includes an expiration/termination (typically 90 – 120 days)

The next article in this series will consider typical valuation approaches when pricing a company for sale (part of the Planning Phase above) as well as what to expect in the Purchase Phase including buyer’s due diligence, quality of earnings, and considerations in structuring a transaction.

In the meantime, if you have questions concerning your organization’s succession plan, please contact Alex Fritz at afritz@blueandco.com or Brad Minor at bminor@blueandco.com

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