Sell-side advisory
You will sell this business once.
Sell-side diligence readiness, financial models, information memorandum preparation, buyer identification and support through negotiation, from Chartered Professional Accountants who spend the rest of their time on the buyer’s side of the table.
If you already have an unsolicited offer or a letter of intent in hand, send it and we will tell you what we make of the price.
What the buyer’s advisor will do
The most useful thing we can tell you is what happens after you sign.
A buyer will engage someone to do financial due diligence on your company.
They will test your earnings
- Normalize your salary to what it would cost to replace you
- Test every add-back you have proposed against whatever documentation exists, and remove from earnings the ones that fail
They will trace the money
- Reconcile your bank statements to your books, and tell the buyer the variance
- Read your general ledger looking for manual entries and round numbers
They will find the ordinary things
- Deferred revenue that was never posted
- The family member on payroll above market
- The truck, the travel, the capital expenditure that got expensed
None of that is hostile. We do this work for buyers, and most of what gets found is the ordinary result of running a company for tax and for family rather than for sale.
The problem is when it happens
By the time a buyer’s advisor is in your records, the price is already written down in a letter of intent, and every finding is a reason to move it in one direction.
You are negotiating from a number you already agreed to, against information you did not have when you agreed to it.
Diligence readiness
Running the same analysis on your own business first is the whole of the argument. What that actually involves:
Restate the financials onto an accrual basis
If they are on cash, which most owner-managed books are. A buyer cannot analyze cash basis records and will not price off them without a discount for the uncertainty.
Get the add-backs documented rather than explained
There is a large difference between an owner-manager adjustment supported by an invoice, a policy and a schedule, and the same adjustment supported by a conversation. The first survives diligence. The second gets moved into the buyer’s list of items where the facts are unclear, and items on that list are priced conservatively.
Reconcile the bank statements before someone else does
So that if there is a variance you find out from us.
Test what is actually there
The receivable aging for what is genuinely collectable. The unrecorded liabilities, the off balance sheet leases, the forward purchase commitments. Maintenance capital expenditure separated from growth, because a buyer will assume all of it is maintenance unless you can show otherwise.
Present three periods
Which is what a buyer will look at: the two prior fiscal years and the trailing twelve months.
This is the same set of procedures described on the financial due diligence page. The work does not change based on who is paying for it. What changes is that you get the findings while you can still do something about them.
Why timing is arithmetic, not urgency
Two of the three periods a buyer will price you on are already closed. They are not going to improve.
Anything you change in the business today shows up in the trailing twelve months first.
So the practical question is not whether you are ready to sell. It is which periods you want a buyer to be looking at, and that answer is set by when you start rather than by when you decide.
We are not going to tell you the market has a window closing. We do not know that and neither does anyone who says it to you.
Selling, and want the problems first?
Sell-side diligence finds what a buyer’s advisor would find, while you still have time to fix it rather than concede it.
Financial models
Owners are usually asked for a forward view during a sale process, and it usually gets produced in the middle of the process under time pressure, which is the worst possible way to build it.
We build integrated three statement models, income statement, balance sheet and cash flow, tied together so that a change in an assumption moves through all three. That matters because a buyer’s analyst will pull one assumption to see what breaks, and a projection built in a single spreadsheet tab breaks visibly.
What the model is actually for
Not to present a large number. It is that the growth story in the information memorandum has to be arithmetically the same story as the projection, and the projection has to be the same story as the last three years of actuals.
When those three diverge, a buyer reads the difference as the real answer.
The information memorandum
The document that goes to buyers is written before anyone has asked you a question, which means it is your one chance to frame the business rather than answer for it.
We prepare information memorandums and the supporting materials that go with them. The financial section is the part we care most about, because it is the part a buyer checks. If the adjusted earnings figure in the memorandum is one that has already been tested against source documents, the diligence that follows confirms your document instead of correcting it. Every correction a buyer makes to your own memorandum costs you credibility on the next item, whether or not the next item is a real problem.
Buyers, and the negotiation
We help identify potential buyers and acquisition candidates, and we work alongside you through the negotiation of terms. In practice the financial questions in a sale negotiation are the ones that get conceded fastest, because they arrive as technical points late in a process when everyone is tired.
The same is true of net debt items, escrow and holdback amounts, and how an earnout is measured and by whom. These are accounting questions wearing legal clothes.
The working capital peg, as the clearest example
A buyer will propose the level of working capital the business is expected to be delivered with at close. If that number is set higher than the business actually needs to operate, you fund the difference and it comes out of your proceeds. There is a full explanation of how the peg is calculated on the quality of earnings page.
It is negotiated in a schedule to the purchase agreement, it is rarely discussed at the price conversation, and by the time it appears in a draft it looks like a mechanical detail. It is not.
What we will not do
We will not give you a valuation opinion. Diligence work establishes what a business earns on a normalized basis. What someone will pay for it is a different exercise and a different engagement, and we would rather say that than blur the two.
We will not act for both sides of the same transaction, so if we are already engaged by the buyer, we will tell you.
And we cannot make a difficult year look like a good one. Sell-side work finds the problems early enough that some of them can be fixed and the rest can be explained on your terms rather than discovered on someone else’s. That is the whole of what it does.
This is not an audit
We do not perform audit or assurance engagements. Nothing we produce carries an assurance opinion.
Will you tell me what my business is worth?
No, and be careful with anyone who offers that number early and for free. What we can do is establish what the business sustainably earns, documented well enough to withstand a buyer’s advisor testing it. The price is a negotiation on top of that figure, and the figure is the part you can control.
Do I have to show a buyer everything you find?
You are not obliged to hand a buyer our work, and most owners do not hand over all of it. The reason to have it is that you get to decide how each item is presented, and in what order, and with what supporting explanation. What you cannot do is prevent a competent buy-side advisor from finding the same things later, with you on the back foot.
Can you find buyers for me?
We help identify potential buyers and acquisition candidates as part of a sell-side engagement, and we prepare the materials that go to them. Whether that is the right approach for your business depends on how many credible buyers exist for it, which is worth an honest conversation before anyone starts a process.
My accountant has done my books for twenty years. Is this saying they did something wrong?
Almost never. Books kept for tax efficiency are supposed to look different from books built to present a business for sale. Those are two different jobs and the first one is the one your accountant was hired for. Sell-side readiness is a translation exercise, and in most cases your accountant is the person we need to talk to first.
What if I go through this and then decide not to sell?
You end up with accrual basis financials, a documented view of normalized earnings, a working model and a clear picture of your cash conversion cycle. Owners who stop the process usually keep using those. It is not a wasted exercise, though we would not recommend commissioning it purely as a management reporting project.
Send us your LOI. We will review the purchase price.
A buyer with a signed letter of intent has already agreed a number. This tells you whether that number survives contact with the accounts, before diligence starts and while the other side is still cooperative.
- A view on whether the multiple looks defensible on the information available
- Where we would expect diligence to find problems
- An honest answer if you do not need a full engagement
Avnit will email you back. Reply to that message with the letter of intent attached.
No cost. One business day.
Start with a conversation, not a process.
Tell us about the business, what you are considering, and roughly when. We will tell you what a buyer is going to test and what is worth doing first. If you already have an offer or a letter of intent, send it and we will give you a view on the price.
The form asks for a letter of intent because most people who use it are buyers. If you do not have one, say so and tell us your fiscal year end instead.