This case study follows the actual process of a successful sale of a company to an overseas buyer, preceded by a period of corporate grooming that was determined to be necessary following the Initial Business Review, together with resolution of complex shareholding arrangements arising from the Initial Shareholder Review.
Although the preparation and actions arising from the Initial Business and Shareholder Reviews extended the timetable of this sale process by many months, the impact on eventual valuation and dealing with the various shareholder interests was very significant and lead to a highly successful result for all.
· Company A is a technology driven company, highly profitable and fast growing.
· Month 0: The founder and controlling shareholder of Company A was introduced to the Partners of Midicorp by Company A’s corporate lawyer who had worked with Midicorp on several past transactions.
· Months 1 – 6: The Initial Business Review This confirmed the growth potential of the company and its important position in a fast moving industry. However, we identified one key area that needed to be addressed prior to commencement of the sale process – that of the financial control function of the business and related to this its accounting policies and audit function (this is not particularly unusual for a relatively young, highly profitable, cash generating and rapidly growing company).
Over the following months several actions were taken driven by advice and contacts provided by Midicorp (i) a full time financial controller was identified and hired; (ii) new auditors were appointed; and (iii) a full review of the Company’s accounting policies and appropriate changes were made that had a significant positive impact on reported and forecast profits and therefore potential company valuations.
· Months 1 – 6: The Initial Shareholder Review This identified another area that needed dealing with prior to commencement of the sale process - that of matters arising from the existing shareholders’ agreement and the rights of different shareholder interests during a sale process. Again, over the following months, with advice driven by Midicorp, the rights of the various shareholder groups were clarified and renegotiated to allow the sale process to commence with all shareholder interests properly recognised and protected.
· Months 3 – 9: Corporate Grooming Once this period of corporate grooming had been completed, the Information Memorandum was finalised along with a List of Potential UK and Overseas Acquirers.
· Months 9 – 12: Selected Potential Acquirers Initial approaches were made with selected companies, meetings arranged and Indicative Offers received. The international nature of this particular sale demanded more time for this stage than perhaps for a more straightforward UK process.
· Months 12 – 18: Leading to Heads of Terms An extended period of meetings and negotiation, dealing with several potential overseas acquirers, led to Final Offers, choice of preferred bidder and Heads of Terms.
· Months 18 – 21: Due Diligence and Legal Contracts A virtual data room was established that allowed for the download of all necessary information for the preferred bidder and their financial and legal advisers.
· Month 21: Completion
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