The second of our three-part series examines the vital next stage when moving forward with exit and sale of your company: Engagement
Our previous blog “Ready to Exit – conduct a feasibility review first!” discussed the need to ensure your company was ‘fit for sale’ and that it was the right choice for owners and organisation alike. Having made the decision to move forward with the sale of your organisation, the next step on the journey is Engagement, which we will discuss further here.
In its simplest definition, Engagement covers the development of a long list of potential companies that may wish to acquire your organisation and then the refinement of that list to businesses we (Pivotal Scientific Limited (PSL)) and you approach and engage with.
There are a few steps before we start to speak to potential buyers, including the generation of a ‘Teaser Deck’ and ‘Confidential Information Memorandum’ (CIM), which we will cover in a separate blog. These documents act as the ‘sales brochure’ for your organisation giving details about your key technical, financial, legal, HR and commercial attributes.
Key to engagement is determining the types of organisations that may wish to buy your company. Sellers, especially in the biotech industry, often believe that the buyer is almost as important as the price. There is an underlying view that selling to the industry is naturally better than selling to private equity, not because the buyer is a fund manager or accountant, but because of the perceived empathy of other ‘scientists’ buying businesses owned by scientists. With the increased number of dedicated life science platform organisations being put together by private equity organisations this perception is shifting as most platforms are still run by scientists and knowledgeable managers in this field on a day-to-day basis.
To build a credible long list of target companies who may be interested in purchasing your organisation, PSL utilise both our proprietary ‘Buy’ base of companies and assets and our broad contacts within the Biotechnology industry. This process is always undertaken in close collaboration with the ‘selling’ company and must be approved by the seller before we move to the next stage.
Potential buyers are then targeted through a standard process of:
Sales brief – confidential memorandum (Teaser deck) is sent discussing the opportunity without revealing your name. Also known as a “blind approach.”
CDA – Interested parties are invited to sign a CDA in order that we can reveal the name of the organisation for sale and respond to initial questions.
Data pack – (confidential information memorandum (CIP)) – a broad set of documents covering Financial, Commercial and Legal and is designed to provide potential buyers with the data to proceed to an offer.
Conversations with management – Potential buyers often request conversations with the management of the organisation for sale. The personal relationship between buyer and seller is often as important as the quality of the business and the revenues.
NBO (non-binding offers) or LOI (Letters of intent) – This is the process of down selecting bidders to the preferred offer. Bidders will submit a non-binding offer laying out the proposed terms of the acquisition and how much they are willing to pay for the organisation.
Due diligence and site visits by the buyer.
Completion – this will be covered in the next blog in this series
The Engagement service from PSL also includes all project management, including supporting the seller’s financial function and legal needs, deal development and ongoing management of potential buyers. This process cannot be hurried and often takes 6 months or more. We have learnt over time the real advantage is regular communication with our clients (weekly), operating to a project plan, with clear timelines and Stop/Go gates.
If you are interested in our M&A services or wish for us to work on an engagement list, or indeed manage your company sale entirely, please contact us.
Over the past four years, PSL has undertaken 19 M&A ‘sell’ transactions and completed over 40 ‘buy-side’ projects. We have presented over 500 companies as potential targets and conducted at least 180 ‘deep dives’ into companies, allowing buyers to focus their M&A activities on the right targets.
