By Linda Rose, founder, RoseASP, recently sold to ESW Capital (IT ExchangeNet facilitated transaction)
Part I - Timing
Welcome to my first in-depth post about selling your Dynamics Microsoft Business! Hopefully you read my last post on why NOW is a good time to consider selling your Dynamics business. If not, here is a link to my previous post. In this post, I will share my experiences on timing: when to start, when not to start, and how long the process will take.
The time between making a decision to sell and finding a broker could take as a little as a week, but most people need more time to process the thought of selling everything, so I cannot speak to how long that might take for you, but for me it took a month to make the mental decision to sell. That said, I had been conversing with brokers for 8 months prior to educate myself on the process, valuations, and just how each broker worked (same reasons you are reading this post). Once I got comfortable with whom my business broker was, from there the process from start (sign with ITExchangNet) to signing the final paperwork with the buyers took 8 months. We lost a month over the holidays, but I went into the holiday season already knowing who my potential buyers would be. IT ExchangNet has a great 100-day process (from start to finish) that they can take you through, but every seller is different and every deal takes on its own life. My first business was sold in half the time; four months instead of eight. Below is how the 8 months broke down on my most recent transaction:
Month 1 – The first month was about getting comfortable with a profile that I truly felt highlighted my strengths and could be easily articulated to buyers. This included me pulling a number of financial data points together: last 5 years earnings with EBITDA, geographic reach of client base, revenue by type (recurring and non-recurring), churn rate and vertical markets we served. More on EBITDA in a later post. This process may be easier for some then others depending on well you manage your financials.
Month 2,3 – Reviewing NDA’s from potential buyers. This truly was the fun part! I was really pleasantly surprised at the broad reach of buyers IT ExchangeNet knew and worked with in our space. Within a short 4 – 5 weeks they had built a tremendous list of interested buyers who wanted to take the next step with an NDA. IT ExchangeNet handled this process nicely for us with up-to-date info on where we were with every opportunity. Once a NDA was signed their team would set up the phone calls with potential buyers. I was truly pleased with the number of people interested in getting into the Microsoft space and who were interested in my company; all for different reasons, but many buyers seemed interested in coupling their existing portfolio/company with a complimentary business such as ours.
Month 4 –During this month we narrowed our selection down to three great opportunities, then narrowed down to two. This process was based mostly upon fit both organizationally and culturally. Having a good fit after the deal was done was very important to me. After a number of calls and a site visit I signed the Letter of Intent (LOI) with my primary choice. Once the LOI is signed you usually have to cease looking/shopping, so be sure that is who you want to continue with, otherwise you can lose a good few months if that turns out not the be the right company for you. Also, now is the time to make sure you have counsel in place that can see you through the rest of the process. Hopefully your years in business has given you an opportunity to get comfortable with a legal firm (or individual). Good legal counsel is so important, so if you don’t have someone now that you can trust to see you through this, start getting references from others.
Month 5 – Taking a break over the holidays – well at least with activities but not mentally or emotionally. You can see a finish line but you are not there just yet. Here is a good time to share my thought on timing; Don’t start the process right before the holidays – people are usually looking to get deals signed by year end, and if not then at least they already know who will close by Q1. If you have not begun by October, then wait until January to begin – but that will begin slowly as people are still wrapping up last year’s deals and need a little breather.
Month 6, 7, 8 – Lots of legal back and forth. What I thought could be accomplished in 30 days, clearly took 90! We ended up with three separate agreements; Purchase/Sale, Non-Compete, and Transition Services, all with their own amount of legalese to wade through. These last three months were where I felt IT ExchangeNet really was invaluable. I rarely spoke to the buyers (by choice) instead voicing any issues through my broker and my attorney. Needless to say, any transaction of this magnitude will have some back and forth that may tax even the most patient of people. And, my CFO and I were sticklers for detail so every word was scrutinized which I am sure was painful for everyone, but necessary.
And then it’s done! You’re in a little shell-shock first. You realize you just sold your second child, but you quickly move into the great “transition” phase.
Stay tuned for my next post - Part II – Valuations (realistic ones) that you can expect for your Microsoft business. (Hint, not the ones Microsoft tells you.)
If you seriously want to learn more or have been contemplating a sale, or just want to understand the process join me on June 21st for a webinar where I will join Tim Mueller of IT ExchangeNet for a more in-depth conversation on the process. Or use the links below to register:
June 21, 2017 at 9:00 am (EDT) or
June 21, 2017 at 9:00 am (PDT)
And of course, confidentiality by all participants will be maintained!