Knowledge center
Learn about selling your business and why selling with Sierra Pacific Partners is the right choice to make your deal HAPPEN.
Learn about selling your business and why selling with Sierra Pacific Partners is the right choice to make your deal HAPPEN.
FINRA-licensed advisors bring a combination of strategic insight and practical experience to the table that enable our clients to navigate the complexities of deals and achieve their strategic and financial objectives.
With an LOI partner chosen, negotiations then take place to finalize the terms of the transaction while buyer diligence continues.
Once terms are agreed upon, the purchase and other definitive transaction documents are signed.
The bid-process instructions provided to buyers will set a deadline for them to submit letters of intent (LOIs)
If overall interest from buyers in a transaction is high, we utilize a two-stage bid process, beginning with a deadline for submitting indications of interest (IOIs).
With the buyer list in hand and cleared by the client, it’s time to go live with the process.
A limited auction targets a group of around 50-100 potential buyers (typically around 50) on a confidential basis, and usually involves controlled bidding involving specific stages and timelines designed to create competition and move the process forward.
In some instances, we work to obtain a pre-arranged financing package for potential buyers.
We use the information gleaned from the company and the market study to prepare marketing materials to position the company, tell its story, and address issues up front where appropriate.
Once engaged, Sierra Pacific Partners conducts a market study using proprietary databases to assess the company’s value, determine active buyers in the industry, and talk to those buyers to uncover how they view and weigh various value drivers.
There are a number of ways to sell a company depending on client goals and circumstances.
At one of the spectrum is the negotiated sale. In a negotiated sale, the seller and its banker negotiate with one suitor. It’s a one-on-one process.
Both prior to and following engagement, we’ll need information from the seller to assist with valuation, marketing, and diligence.
Before embarking on an M&A process, many sellers think an investment banker or M&A advisor’s primary role is to find a buyer.
In fact, post-closing surveys of sellers repeatedly show the opposite-- that sellers view buyer sourcing as the least important part of what advisors do.
The first step in any sell-side M&A engagement is clearly understanding our client’s goals.
What type of transaction is the seller seeking? For example, a sale of the entire business to an unaffiliated third-party, a recapitalization, an intrafamily transfer, or something else?
At Sierra Pacific Partners, we’re focused on one thing: Transformative exits that achieve our client’s M&A goals, which often go beyond price alone. We make deals happen.
Asset deal M&A transactions are more prevalent in the lower middle market for several reasons:
In an asset deal, sellers typically retain certain assets that are not
explicitly included in the transaction, which may vary depending on the specific terms of the deal. Common assets that sellers often keep include:
Some common deal killers include:
Valuation disagreements:
Due diligence issues: things like financial discrepancies,
legal problems, operational challenges, or undisclosed liabilities. Significant concerns can cause a buyer to renegotiate the deal terms or walk away altogether
In M&A transactions, one party, typically the seller, agrees to compensate the other party, usually the buyer, for specific losses or liabilities that may arise after the deal closes. These losses may result from breaches of representations and warranties, inaccuracies in the disclosure schedules, or failure to fulfill certain covenants. Indemnification clauses protect the buyer against un
foreseen issues and help allocate risk between the parties
Rollover equity is a financing structure in M&A transactions where the seller retains a portion of their ownership in the target company after the deal is completed. This arrangement aligns the interests of the buyer and seller by allowing the seller to participate in the future upside of the business.
In an earnout, a portion of the purchase price is contingent on the target company's future performance. It helps bridge valuation gaps between the buyer and seller by tying payment to specific financial or operational milestones.
A search fund is a unique investment vehicle used by entrepreneurs to raise capital from investors for the purpose of acquiring and operating an established, profitable business. The search fund model was first developed at Stanford University in the 1980s and has since gained popularity among entrepreneurs and investors.
Selling to a PE firm can be a great decision depending on your circumstances
The cost of selling a business can vary widely based on factors such as the size and complexity of the business, the industry, and the specific services required during the sales process. Some common expenses involved in selling a business include
Industry expertise, while helpful, is not as import as dealmaking expertise, particularly for transactions below around $100M.
The due diligence process in a small M&A transaction involves a thorough investigation and review of the target company's business, financials, operations, legal, and regulatory compliance.
The goal is to identify potential risks, liabilities , and opportunities associated with the transaction. While the process can vary depending on the size and complexity of the deal, it generally consists of several key steps:
Letters of Intent (LOIs) are important in M&A transactions for several reasons:
Assembling a team of experienced professionals will help ensure a smooth and successful sale of your business. The key advisors you may need on your deal team include:
Selling a business can be a complex and time-consuming process. Proper preparation will make your business more attractive to potential buyers and maximize its value. Here are some steps to help you prepare your business for sale
Sierra Pacific Partners was founded to advise business owners in transactions that are too large for most Main Street business brokers but too small for investment banks. Our goal is to bridge the gap and serve the lower end of the lower middle market.
M&A advisors use a variety of fee structures. Some will charge a startup fee, a monthly retainer, and/or a success fee or “commission”. Some will only charge success fees.
Qualifying buyers is an important step in the sales process to ensure that you’re not wasting time or sharing confidential information with parties that can’t or are unlikely to purchase your business.
In general, you should plan on it taking around a year to sell your business from the point when you make the decision to pursue a transaction. It’s definitely possible to sell in half that time or even more quickly (particularly if you’re willing to discount the purchase price for a quick sale), but you shouldn’t count on it if you want to get the best price from the best buyer.
When you begin exploring buying or selling a business, you’ll inevitably come across the term “seller financing.” What exactly is seller financing?
Who is the right type of buyer for your business? You need to know who to target during the marketing phase. After the sale, you want to make sure the buyer is capable of preserving your legacy and providing security for your employees. And if there’s seller financing or an earnout, that the buyer is able to run the business successfully so that you get paid.
If you’re selling your business, you have to get word out to potential buyers and put your best foot forward. BUT you also need to keep the sale confidential. That seems like a Catch-22 – how do you do both at the same?
At root, SDE is a way to normalize businesses so that they can be compared to each other and so buyers can determine how much cash the business will generate. The reason SDE is needed is because different owners keep their books differently.
While there are many ways to arrive at a valuation, one of the most commonly used is the multiple of earnings method. Depending on the size of your business and the type of buyer you’re seeking, earnings will either be seller discretionary earnings (SDE) or Earnings Before Interest Taxes Depreciation and Amortization (EBITDA).
The short answer is that your business will be worth a multiple of earnings, plus inventory in some industries. Calculating earnings — particularly seller discretionary earnings (SDE) — is a somewhat subjective process, and your M&A advisor or broker can help.
When you don’t have a done deal, murmurings of a sale process create uncertainty among your employees, vendors, customers, your landlord, and others.
As with most things in life, the best time to sell your business is when you don’t have to. Being forced to sell at the wrong time means not realizing the best purchase price, while selling on your own timing can set you up for a retirement enjoying the things you love with the people you love.