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Prepping for Exit - a Founder’s Perspective on M&A - Issue #13

How long will the process take to sell the company?
Issue #13  •  February 26  •  View online  •  Suggest a link
Prepping for Exit - a Founder’s Perspective on M&A
Prepping for Exit - a Founder’s Perspective on M&A
Is it time to consider selling your startup? Looking for a founder’s perspective? Dave Parker is a five-time founder with >10 exits. This reading list is practical advice on prepping for exit, pricing and the process.
How long will the process take to sell the company?
How long does it take to sell my company?
Simple questions can have more complex answers when it comes to selling your company. Like your company growth plan, it’s all about your planning.
The mechanics of selling won’t take that long. The preparation for selling could take years. If you’re under $1M in revenue, there are large market buyers that won’t give you a solid look unless you have some unique IP or technology that fits into their roadmap to fill a critical path.
A short sales process can be 90 days and the average is six months. However, if you’re just starting a process be prepared to spend 60-90 days to get all of your “ducks in a row” starting with your due diligence documents and data room. Here’s a checklist of items you’ll likely need to have in place. I would recommend setting up a OneHub data room vs a Box/Dropbox. This will allow all of your documents to be watermarked and you’ll be able to track who has reviewed which documents.
  • Corporate matters
  • Founder matters
  • Financials
  • Security
  • Etc.
Also, talk with your accountant or lawyer about the tax ramifications of doing a deal - bankers can help answer that question. If you’re a “QSBS” qualified small business stock, you’ll want to make sure you’ve optimized around your timing to exit and don’t have a big tax bill.
Are you going solo or hiring a banker? From the time you contact a banker to let them know you’re looking to run a process, I would expect them to have done the research and a proposal back to you in 30 days.
Things you can do to make the timing work against you:
  • Run low on cash - for example, having less than 6 months cash in the bank is a bad thing as it relates to a transaction. Unscrupulous buyers can kick the closing out 30 days and potentially cause you to miss a payroll.
  • Seasonality - There are good and bad seasons to sell just like the fundraising season. It can be hard to get people’s attention during the summer break or winter holidays. Kicking off a process in those seasons can be hard, but you can easily close if the process is far enough along.
  • No surprises - if you have any pending litigation or issues, make sure you talk to your banker in advance to help manage the message
Things you can do to make the timing work in your favor:
  • Build relationships with up-market buyers.
  • Good corporate hygiene - are your taxes completed? Do you know your bylaws? Is your Board book up to date?
Usually, bankers can work within your timing, just don’t limit the optionality of getting the best return. 
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Techstars Startup Digest Prepping for Exit - a Founder’s Perspective on M&A is curated by:
Dave Parker Dave Parker
dave.parker@startupdigestmail.com
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