Previous Page  |  Home  |  Contact  |  Site Map 

Capital Ideas for Middle Market Businesses

How Long Will it Take to Sell My Business?

By Jeremiah Hughes, Managing Director
Omaha Office
Corporate Finance Associates

question marks

That’s perhaps one of the ‘top five’ most common questions business owners ask when considering a sale, yet, the most accurate way to respond is, “it depends.” There are many factors affecting how long the sale process takes; some, such as price expectations, can string out the process, and others, such as hiring an experienced M&A advisor, can help to expedite it.

Typically, the sale process is a six to 12 month endeavor. Oftentimes, advisors are approached in the second or third quarter of the year with expectations of closing a business sale before year-end. While it is possible for a deal to get done in three to four months, it is highly unlikely. The following is an overview of the sale process to better explain why it takes so much time to complete. For the sake of simplification, let’s break down the process into three parts: pre-marketing, marketing, and closing.

The pre-marketing phase is typically a one to two month process. This involves a lot of information dissemination and research. Information about the business is collected and articulated into marketing materials, which are reports and various other supporting documents instrumental in introducing and educating potential acquirers about the sale of a business. The research part of this process entails combing through lists of companies and investment firms in order to qualify them as potential buyers for the market outreach. The main factors affecting the timing of this part of the process include how organized the information about the business is and how quickly the information can be delivered.

The marketing phase can be as short as two months, to more than a year depending on many factors. In the opening part of this process, advisors reach out to either a few, or potentially hundreds of prospective buyers to initiate conversations and answer questions about the opportunity. As you may assume, the difference between a few and hundreds of potential buyers weighs heavily on the length of time it takes to complete this initial outreach. After the initial outreach, a group of serious buyer prospects remain interested in digging in to learn more about the opportunity in hopes of formulating an offer. The process of learning more at this stage in the process includes calls with management, meetings with management, onsite visits, and lengthy information requests.

The closing phase entails negotiations of offers, lining up financing, and the formal due diligence process; this typically lasts between two and four months. Negotiations of offers takes several weeks due to back and forth negotiation to reach a mutually acceptable offer. Arranging financing usually begins in parallel with the starting of the formal due diligence process. It can take up to a couple of months for the buyer to select their financing source, and for the financing source to get comfortable with the investment. The formal due diligence process entails an in-depth investigation of the business, oftentimes through the use of specialized third-party representatives, and can last a couple of months. This process entails much more in-depth information dissemination which can take several weeks to track down.

In summation, the pre-marketing phase of the selling process tends to last one to two months and the closing process tends to take two to four months, while the marketing phase has a wide range of timeline possibilities. The majority of the marketing process timeline is dependent on many factors: price expectations, financial strength, industry M&A activity, market trends, and clarity of owner’s objections, to name a few. As our clients’ representatives, we are responsible for ensuring the entire selling process and the timing associated with it is properly explained, in detail, before any decisions are made. The more upfront, honest, and transparent we are as advisors, the more our clients feel comfortable reciprocating that same amount of trust in return. Creating this type of relationship is perhaps the most important factor in the execution of a smooth and timely deal process.


NOT ON OUR DISTRIBUTION LIST?
If someone forwarded this newsletter to you and you would like to continue to receive future issues, please sign up now.