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Sell-side M&A – Why a business Information Memorandum is critical for an acquisition
The driving factor for many of us entrepreneurs, is the thrill of the chase. Chasing that first big client. Pursuing market relevance. Always on the trail of growth and, for many of us, the eventual sale of the business. Yes, as business owners, the ultimate win in this life on the perpetual hunt of business progression, is the sale of our company. And not only because it is an opportunity to unlock wealth, but because acquisition for a business often means new avenues of growth, and the establishment of our legacy in the industry we occupy.
But when it all comes to a head, and that goal of a business sale looks imminent, how does the owner ensure its completion? Because after all, selling a business is a delicate latticework of process, storytelling, fiscal analysis and due diligence. Each step is critical, and could be tenuous at best, if a proper plan detailing the strengths of the business isn’t in place. Throwing caution to the wind has no place in a sell-side acquisition – planning is key.
Let’s talk here around the notion of the business Information Memorandum, and how it is a vital asset, and often a contributor to engaging acquirers for that ultimate M&A sale.
Overall assessment and strategy
Sound planning is key to a successful progression of a business lifecycle, typically done at least annually leading up to its eventual sale. And so, the Information Memorandum is essentially a summary of the history of the company’s planning and results.
Here’s what should be included in an Information Memorandum:
- Your Story – summarizing your business journey and telling a crafting a compelling vision for the future of your company is one of the most powerful tools to engage acquirers
- Finances – simply, profit and loss analysis, fiscal history, cash flow and forward-looking projections, and assessment of risks and opportunities
- Triumphs – a clear articulation of your successes in specific markets, developing specific products or services, creating innovative sales channels is critical
- Your exit– and of course, the finish line for your tenure in the business, your exit plan must be very clear to focus your sell-side process on the right types of acquirers
The Information Memorandum – When to develop yours
So, you have decided to sell your business sometime in the next year or two. But when do you engage with an M&A advisor to create your Information Memorandum?
As with many aspects of business, crafting the right story and presenting yourself in the best way possible to be attractive to outsiders takes time to get just right. The Information Memorandum needs to compel acquirers to want to learn more about your business and its prospects for the future as well as position you or your team as having the passion to continue growing the company. Why? Because it shows that the business has been well-run and is efficient in the use of its resources; the product or service you provide is needed; and your team has the energy to keep going. And for any acquiring entity, this legacy of growth, profit and momentum, is the most electric point of attraction.
At Destined, we know how to find the thrill of the chase in every phase of a business lifecycle. Talk to us today – we want to show you how to plan for that eventual sale of your business.
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