In a company sale process, having a detailed preparation phase is key to achieving a good outcome. Crafting a compelling equity story, preparing a granular financial model and frontrunning from the outset all diligence requests that might arise later in the process can help deliver the right messages and make a strong impression with buyers.
However, the most successful sale processes also benefit from another ingredient - high levels of competitive tension amongst buyers. Creating the scarcity effect and encouraging buyers to bid against one another can result in significant value optimisation.
Competitive tension depends on several factors
For instance, the number of buyers in a process will impact competitive tension. Having many buyers competing for the asset means that there will be a range of offers and inevitably a higher valuation! Of course, for practical reasons, there is a limit on the number of buyers that you can include in a sale process. It is therefore important to calibrate the number of buyers in the later stages of the process when the due diligence process becomes more intense.
A clear process structure, with tight and defined deadlines, will help manage the number of buyers and remove from the race counterparties that have presented unconvincing bids or which have shown lukewarm engagement. Moreover, it will help in communicating to investors from a position of strength and convey a sense of confidence and control.
Managing interest from multiple buyers simultaneously, sometimes in parallel until the end of the process, requires copious amounts of work. Expect a higher frequency of management meetings with buyers, questions on the business and diligence requests.
These questions have to be answered by management and detract from the precious time that you can spend running the company, which buyers will want to see performing well throughout the process!
An Ithaca specialist can help you increase competitive tension and extract the maximum value from the sale. They can help you to identify and access the right pool of buyers, access them and help you communicate with them throughout the process.