There are many reasons to consider the divestiture of a business. Divisions of a company may have developed a market presence that can best be leveraged by being a separate entity. Or they may benefit from alignment with other, more synergistic entities. A division may represent value that can better be used for other strategies. Regardless of the reasons for a divestiture, we have the expertise and experience to explore options that serve your needs and enable the development of your business plans.
The Keystone Method for Divestitures
The KEYSTONE METHOD is a PROCESS APPROACH designed to sell a division or a portion of a business for maximum value. It consists of 13 separate activities, each one carefully planned and properly executed to ensure a smooth transition to the next activity. Proper execution of each activity is crucial to the overall success of the sale of the business entity. You will be able to be to monitor and be engaged throughout the entire process.
The program begins with a meeting between you and KEYSTONE at a confidential location of your choosing where potential divestitures are discussed frankly, openly and confidentially. Our objective is to begin to understand your objectives, and learn about your business and strategy.
Marketability Assessment & Valuation
If we mutually agree to proceed, KEYSTONE will perform a confidential Marketability Assessment for the target entities. This document is for the seller's eyes only. It analyzes the business and focuses on the probability and price range at which the entities may sell in the current M&A environment. The Marketability Assessment consists of three essential components:
Compiling financial statements that reflect performance of target entities
Defining future assumptions
Pro-Forma preparation reflecting the entities in likely scenarios
Definition of Company Needs
The needs of you and your company must be addressed early in the process. They need to be well thought out and documented to insure their satisfaction as the transaction proceeds. Time frames, likely transaction values and impact on balance sheet are all key considerations. This important stage will provide a guideline for preliminary negotiations and the deal structure of the transaction.
Confidential Marketing Document
KEYSTONE will prepare the Confidential Business Review - the official selling document for the target entities. This document sometimes called the “deal book” is a comprehensive information package that contains much of the information a prospective buyer will need to make a decision on pursuing the acquisition of one or more entities. This comprehensive document includes factors that will add value and marketability to your company such as:
Entity history / description / profile
Potential New Business
Asset List/ Hidden Assets
Proforma and Recast Financial Statements
Organizational Structure (current and projected)
Employee & Key Employee Information
Products, Technology, Patents
These issues are formatted and professionally written to appeal to the buyer's perspective as they address ROI, strategy fulfillment and synergy with their existing operations. Potential buyers will evaluate an entity or entities by projecting the results of future infusions of capital, technology marketing synergies and efficiencies. The Confidential Business Review will help them project how these factors will impact future operations.
Confidential Executive Summary
KEYSTONE will contact a significant number of prospective acquirers (just suspects at this point). The Confidential Executive Summary is a 1 or 2-page profile of your company, used as a lead generation marketing tool to create a preliminary indication of interest from prospective buyers. The profile includes a very short summary write up about the target entities highlighting some of the strengths; it also provides some basic financial information (sales, COGS, EBITDA). The profile is written to be blind - it never discloses the identity or location of the entities.
Prospecting Strategy Meeting
This is a critical, extremely important meeting where you and KEYSTONE will create the basis for marketing target entities. All the resources and experience of KEYSTONE and our affiliated networks are focused on the issues of who will be the best buyers for the entities, and what factors might impede a sale. The KEYSTONE Proprietary Buyers' Database and the KEYSTONE Affiliates Buyers' Databases will be used to identify prospective buyers. Also, at this meeting a basic criteria is developed to identify other industries and companies that might be interested buyers.
Primary Step Marketing
Based on the decisions made at the Prospecting Strategy Meeting KEYSTONE will develop a "long" list of active and prospective buyers. Numerous sources are considered to create this primary list:
KEYSTONE’S Buyers' Database
KEYSTONE Network Affiliates and their Buyers' Databases
Private Equity Groups (PEG’S) / Private Equity Firms
Companies in related businesses that might benefit from the strengths of the target entities
Special M&A publications
Special trade publications related to your industry
After you approve the primary "long" list, initial contact is then made with potential qualified buyers by providing them with the Blind Executive Summary. Interested parties are required to sign our Confidentiality Agreement and (when appropriate) complete our Buyer Profile Questionnaire. These documents which must be signed and returned prior to receiving any confidential information on the business.
Confidential Marketing to All Respondents
Prompt response and proper follow up to all interested buyers with a copy of The Confidential Business Review is essential. The cover letter clearly outlines the manner in which the sales process will be managed, including time tables. Often the entities are “brought to market” without a set asking price being placed on the entities.
Negotiating and Deal Structure
The KEYSTONE Method is designed to bring multiple, qualified buyers to the table. Under ideal circumstances creating a competitive auction environment among multiple prospective buyers will maximize the selling price of the entities.
The Letter of Intent
KEYSTONE will help assure you that this extremely important step is done thoroughly and thoughtfully. It is the "Agreement to Agree" with the buyer of your choice. It spells out the basic elements of the expected transaction. Generally, further marketing activities stop at this point while the buyer performs due diligence on the target entity or entities.
This step involves a detailed investigation by the buyer into the target entities. KEYSTONE will coordinate and communicate with the buyer’s due diligence team and will be there to assist you through this entire critical phase of the transaction.
The Purchase Agreement
During this phase, all the documentation for the transaction comes together. We use our experience to review the purchase agreement, exhibits and related documents to make recommendations, and assist in resolving last minute differences. KEYSTONE will work closely with your team of professional advisors, attorneys, and CPA’s to finalize the agreement.
This is your objective and the end result you have anticipated. This is the result that the KEYSTONE METHOD is designed to achieve at the maximum financial reward to you and your company – our valued client!