Benefits of Working with a Sell-Side Advisor
If you are considering selling your business but not sure where to start, you are not alone. As a first-time seller, navigating the sale process and conducting the due diligence necessary to find a qualified buyer can be quite rigorous. By partnering with a sell-side advisor with specific industry experience, you’ll not only achieve the desired outcome, you will be confident your business, staff, parents and children are in good hands after you part ways with the business.
Studies show that a large majority of middle market business owners that hire a sell-side advisor achieve a final sale price equal to or greater than initial estimates provided by their advisor. The benefits of bringing on a sell-side advisor go far beyond finding you the highest bidder.
5 Reasons to Work with a Sell-Side Advisor
Planning for a sale
Aligning with a sell-side advisor with industry experience will provide much more than a qualified buyer. From the beginning, weeks before going to market, experienced advisors are able to establish expectation for you as a seller as well as construct a go-to-market strategy to get the most out of the sale.
Sell- side advisors know what buyers’ value most when looking for potential acquisition targets, such as strong management teams, as well as traits that give pause to buyers. An advisor will analyze the businesses financial documents to complete an initial valuation and convey the likely market value of the business. In addition to a sell-side advisor, the seller should also hire a strong M&A attorney (sell-side advisors are able to introduce their clients to M&A attorneys, wealth managers, accountants and other professionals who will help plan for a successful exit) to assist with the transaction.
Documentation your sell-side advisor is likely to request to properly value your school includes: tax returns, profit and loss statements, enrollment trends for the last 12 months, tuition rate sheets, and a business operations questionnaire. Depending who you hire as your sell-side advisor, these documents may vary or have a wider/narrower scope but all documentation will help drive the overall valuation of the business.
As common practice, before sharing any financial documentation or non-public information, both parties will sign a Confidentiality Agreement to ensure privacy among all parties.
Market Knowledge
As the owner and operator, sellers have the advantage when it comes to the knowledge of their own company, however, buyers are typically more experienced when it comes to completing transactions. Sell-side advisors are able to provide insight into the buyers understanding of market dynamics and share industry knowledge. They will be familiar with the most recent trends, knowing the type of companies that are looking to make an acquisition and those who are not. A sell-side advisor will know what buyers are looking for and how to market your school to attract the buyers best fit for your school. This will play an important role when you go to market and have to vet potential buyers.
Managing the Sale Process
The process generally includes but is not limited to:
I. Preparation & Positioning - THE PREPARATION PHASE consists of identifying seller objectives, generating due diligence materials, developing market positioning, preparing offering materials and organizing a go-to-market plan.
Strategic Planning - focus on learning more about your business and determining suitability for going to market. We discuss your objectives including pricing expectations, post-sale goals, etc.
Information Gathering - upon providing a signed confidentiality agreement, we request a short list of informational materials to better understand your school’s operational and performance history along with its competitive position in the market.
Evaluation & Valuation - dive deeper into determining the value of your business and real estate. This includes a full review of your school’s financial performance, including “normalizing” your income statement, conducting market research, and evaluating the real estate dynamics, etc.
Value Enhancement - identify potential weaknesses, risks and areas of improvement to address to enhance the value of your business before going to market.
Engagement - execute engagement agreement with SchoolWise Partners as your exclusive sell-side advisor.
II. Confidential Marketing - THE MARKETING PHASE involves confidentially identifying and engaging potential buyers, conducting a competitive limited auction, soliciting initial offers, and finally selecting a buyer through negotiations.
Offering Materials — finalize confidential information memorandum and supplemental financial model to distribute to approved, target buyers.
Target Buyers — identify and approach buyers that best match your objectives including pricing expectations and strategic fit. We manage the flow of information through a secure data room and hold all strategic discussions with interested parties.
Confidentiality Agreement— execute confidentiality agreements with potential buyers before providing online data room access and distributing additional information including the offering materials.
Meetings & Tours— manage buyer inquiries and calls to minimize business disruption. Select buyers will want to take a confidential tour of your school after-hours. We coordinate the logistics of each meeting to ensure confidentiality throughout.
Offer Evaluation — finally, we coordinate a due date for all written offers in which time, we review and push all parties to submit a final round of bids before signing!
III. Due Diligence & Closing - THE DILIGENCE & CLOSING PHASE involves facilitating the buyer’s confirmatory “due diligence” – the equivalent of a house inspection – as well as negotiating and drafting legal documents to formalize the sale.
Quality of Earnings — the buyer will engage a third-party CPA to review and confirm the company’s financial and operational position as presented in the offering materials.
Real Estate Inspections — this stage involves conducting a series of inspections on the property including a Survey, Conditions Report, Phase I, Mold & Asbestos, etc.
Purchase Agreement — this stage involves the drafting and negotiation of the mutually binding contract which sets in stone the conditions for the sale for the business and real estate.
Licensing & Transition — we guide both parties through the change of ownership process with the state’s licensing officials. We also help facilitate the announcement to the teachers, staff, and parents.
Management Focus
As a seller, navigating the process of a sale can be very distracting from the daily operations of the business, negatively affecting performance and lowering the value of your school. Guidance from a sell-side advisor allows management to keep their focus on the business and ensure operation do not take a back seat to the transaction process. Your advisor can serve as an intermediary between you and any potential buyers so your time isn’t wasted with unqualified buyers.
Objective Perspective
Selling your business can be an emotional process. An independent, outside advisor helps owners carefully evaluate all options and minimizes the likelihood of biased and irrational decision-making. Any advisor you hire should have a long industry track record and can help with any questions or concern you may have.
Summary
Going to market with a sell-side advisor adds credibility and shows to a prospective buyer that you are serious about a sale. An advisor will keep the transaction process moving forward while management is focused on keeping the business running smoothly. Sell-side advisors know where the potential pitfalls lie, for example, with unqualified buyers who can harm a seller by breaching confidentiality, or the buyer simply doesn’t not have the capital required to complete the transaction.
Even if the sale of your business is in the early stages or if you are just starting to explore the option of selling, seeking out an industry experienced sell-side advisor should be at the top of the to-do list. Be sure to ask about previous sales they have facilitated in the industry or references of clients they previously advised that you could reach out to. Any sell-side advisor you hire must be familiar with the competitive industry landscape and have ample industry contacts to help find the best buyer for you school. Partnering with a sell-side advisor will allow you to feel confident you are getting the best deal.