Private Equity

Selling to Private Equity – what does the process look like?

Selling your business, or a major stake in it, to a trade or private equity buyer is hugely important process for a founder entrepreneur. It can create significant wealth for you and, in the case of private equity, set a course for the next four to five years of your life.

So what does a deal or “process” actually look like?

Whilst no two investment processes are identical, there is a lot of commonality as one way or another, you need to get to an agreed price and agreed terms with someone. The journey may vary slightly but the end is always the same.

Key stages

The three key stages really are :

  1. Advertise your business to people who might want to buy it
  2. Get the best offers possible
  3. Complete a deal with the investor you like the most.

Timescale

Within those three stages, here are the key steps. Remember some processes may merge or miss out some of the steps – there’s a lot of nuance here.

When I sold Reward Gateway the first time, the teaser generated enough excitement that three private equity houses each said they wanted to get ahead and make a bid “off-market”. That meant I ended up selling my business for the first time without ever producing the IM (investment memorandum).

Steps that you will go through.

  • Appoint an investment bank – your advisors
  • Assemble a long list of potential bidders from trade and PE
  • Send out a teaser
  • Maybe kiss some frogs, get a feel for who is out there and who you might like
  • Remove from the long list any frogs you couldn’t bare to work with
  • Send out an Investment Memorandum
  • Get feedback, potentially have meetings with and answer questions from everyone, or at least the frogs that you liked best
  • Get first round offers
  • Make a shortlist or 4 or 5 of the best offers
  • Present your business to each of the leading bidders – this is called the management presentation
  • Maybe have a management dinner with each of those bidders
  • Get second round offers
  • Have your advisor squeeze out the last juice you can from your bidders
  • Decide on your first choice and agree a period of exclusivity where you will, hopefully, complete the deal
  • Engage in the due diligence exercise
  • Hopefully complete!

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