We have been working on a sell side representation deal that we closed a couple of weeks ago and announced last week. Thankfully, it was anti-climatic. They generally are, especially now in the post-Covid19 world of all DocuSign based closing paperwork. Don’t get me wrong, closing is followed by a wire transfer and those are always great for the founder and everyone else!
The reason is, by the time you get to the close, all of the work has been done. Hopefully, your advisor or banker is walking you through the process and there aren’t any surprises along the way.
Pricing is usually pretty set at the Indication of Interest (IoI, not a laugh out loud) or Letter of Intent (LOI) stage. Prices can go down in due-diligence but very rarely go up.
In the 30-60 day due diligence process your buyer has locked you up from shopping the deal and they are digging deep into contracts, employment and assignment agreements and financials. You’ll be working with them to model some of the joint assumptions. Aggressive buyers will be looking for areas they can ding you on pricing.
You’re also going to be working through the post deal transition planning. Who reports to whom. Who will train the sales org. How will the product(s) get integrated, etc.
Then you’ll be down to definitive documents. Things start heading down the Lawyer to Lawyer path at this point. But be careful not to defer the business decisions to Counsel. Counsel is there to help but not drive the process. Business decisions drive the process (and it keeps legal fees down).
Deals blow up more often on terms vs price. Cash vs. stock. The value of the stock if it’s private. How big is the escrow and for how long? What are the reps and warranties?
I was in a bike race in Victoria Canada, halfway through the ride and in the f the toughest climb and there was a woman dressed in a dominatrix outfit with a whip yelling that we were 100M from the top as it ramps to a 17% grade. That’s the same as getting thru definitive docs, terms, and Due Diligence.
By the time you get to the finish line, it’s feels uneventful!