When undertaking a sale process, there are a number of documents that need to be created to maximise the value of the business that is being sold.
When looking to sell, it is important that the business is presented in the best possible light. The future direction, or story, of the business must be clearly articulated, and more importantly, easily understood by all prospective buyers of the business.
Nash Advisory has unparalleled experience in helping businesses prepare for sale. To secure the best possible outcome for your business, get in touch with our expert team.
The documents requested by a prospective buyer of the business are classified by each stage of the sale process.
1. Sale planning and strategy
Comprehensive initial documentation will set a solid foundation of understanding in the stages that follow for both buyers, sellers and shareholders.
Request for Information (RFI) — internal use
This internal document is created by the business advisor and completed by the business owner or management team. It usually consists of a list of questions and a checklist of documents and resources necessary for the sale process to proceed. The RFI ensures that all information required as part of the sale process is collected from the seller of the business at the earliest opportunity. This allows the advisor to confirm that the business has all the necessary information available to proceed with the sale and also identify any gaps or potential issues early in the process.
Buyers list — internal use
Following detailed analysis of the sector and market in which the sale process is proceeding, a Buyer's List is created by Nash Advisory. This document is a formalised list of prospective buyers who could be approached to sell the business to. The Buyer's List is presented to the shareholders of the business for review and approval.
Confidentiality Agreement (CA)
This is a legally binding document between two parties — the owners and prospective buyers of the business. This document is created to ensure a common understanding of the obligations of both parties when sharing business information that may be confidential in nature.
A one-page flyer is a confidential, un-branded summary of the business for sale. It contains key high-level information and is sent to approved, targeted buyers. The purpose of this document is to encourage prospective buyers to sign a Confidentiality Agreement, which in turn will allow further information to be shared between the parties. The document normally contains the following business information:
- Primary business activities
- Current financial performance
- Key growth trends
- Other important information
2. Business information delivered to targeted buyers
The second stage of the business sales process requires transparency and accuracy to ensure the best outcome.
Once a targeted buyer has expressed an interest in the business and has returned the Confidentiality Agreement (CA), the Information Memorandum is sent to the buyer. This document is the most effective way of providing a large volume of information about a company to potential buyers.
It should include as much information as possible to reduce future correspondence on the same topic. This document is commonly in excess of 50 pages. Areas covered may include:
- Acquisition opportunity
- Sale process and key dates
- Deal structure
- Business overview
- Business highlights
- Market overview
- Operational insights including strategic focus, customers, and case studies
- Any certifications, awards and licences
- People, including organisational charts and locations
- Growth opportunities
- Financials including Historical P&L, revenue highlights, wages
A financial model is created to detail the real-world financial situation of the business, and is crucial to securing maximum sale value based upon growth initiatives. The model is used to represent the performance of:
- Each asset, portfolio, product or offering of the business
- Growth initiatives forecasted for the business
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Specific buyer documents
Prospective buyers often have many questions and queries. As a result, numerous buyer-specific documents may be created throughout the sale process.
3. Transaction documents
Finally, the transaction of the business sale cannot proceed without proper legal documentation.
When a buyer has formally submitted an offer, a term sheet is created to detail the specific terms of the deal. Once the terms have been agreed by both parties, the shareholder agreements are created by the seller’s legal representatives, reflecting the terms and conditions of the deal.