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When it’s time to sell your business, make sure you have the best lower-middle-market M&A Broker team representing you from start to finish.
Selling Your Lower-Middle-Market Business for Maximum Value
Pacific Business Sales specializes in M&A transactions in the lower middle market (LMM), serving businesses with $5 million to $100 million in annual revenue. LMM businesses are too small for Wall Street M&A investment bankers who handle billion-dollar deals, and too big for typical business brokers who sell small, Main Street businesses.
To sell your LMM business for maximum value and the best terms, you need an M&A broker who understands your business, knows how to successfully navigate lower-middle-market deals, negotiate favorable terms in complex letters of intent (LOIs), purchase agreements, and, most importantly, close the deal.
Pacific Business Sales excels in lower-middle-market M&A transactions.
Our industry experience as lower-middle-market business brokers spans various industries, including aerospace, manufacturing, construction, professional services, distribution-3PL, and technology. We leverage established relationships with private equity groups and institutional investors nationwide who are interested in acquisitions within our practice areas.
Avoid the high upfront fees of large M&A firms
Pacific Business Sales requires no upfront retainers
All our fees are paid at closing
Our business model is based on a success-based fee structure. We do not charge upfront or monthly retainers to generate revenue.
Securing a strong offer is only the first step in the transaction process. We provide expert guidance through every stage of the transaction, from LOI negotiations and due diligence to the Quality of Earnings (QofE) review, final purchase agreement, and closing.
We are thorough, persistent, and relentless lower-middle-market business brokers.
7 Steps in Selling Your Lower-Middle-Market Business and the Transaction Process
Your initial consultation with us has a simple objective: answering your questions about the process of selling your business, allowing you to learn more about our firm, and helping us learn more about your company.
After receiving your financial statements, we prepare a market value analysis and schedule a meeting with you to review the results, our recommended asking price, and the expected selling price range.
You will need the following financial statements for our lower-middle-market business brokers to determine your business valuation:
- Last three years of tax returns
- Last three years’ profit and loss (P&L) statements
- Year-to-date P&L (through the most recent month-end)
- Balance sheet for the last year-end
- Balance sheet (up to most recent month-end)
- Accounts receivable (A/R) summary
After reviewing the market value with you, we send you the Representation Agreement.
The next thing we do as your M&A brokers is to send you a request for additional details about your company so we can create the Confidential Information Memorandum (CIM). This is done after the Representation Agreement is signed.
Prospective buyers receive the CIM after they have signed our confidentiality agreement (NDA) and completed a detailed buyer profile, which includes their experience and personal financial statement, or a firm profile for equity groups.
What Your CIM Includes
Our experience as lower-middle-market business brokers means we know exactly what the buyer is looking for.
Our CIM is a comprehensive prospectus of your company. It includes:
- An overview of your company and its history
- Details of the company services and products, customer concentration, and profile (with names redacted)
- Financial statements
- A staff list (without names)
- An equipment list, and more
The CIM provides prospective buyers with sufficient information to determine if the company is a good fit before they make the decision to move forward.
Initial meetings are between our lower-middle-market business brokers and prospective buyers to minimize interruptions and meetings with you.
As part of our lower-middle-market M&A process, we carefully screen potential buyers. After we have met with the prospective buyer and answered their initial questions, we set up a meeting with you.
The first buyer-seller meeting is usually via Zoom to minimize interruptions. Also, many private equity (PE) firms and institutional investors are out of state or have team members in multiple locations.
On-site and in-person meetings happen later in the process and are always scheduled after hours when no employees are present. If necessary, we host meetings at our office.
Most PE firms and institutional investors start with a letter of intent (LOI) to start the due diligence review process. As lower-middle market business brokers and M&A brokers, we are very familiar with equity group and institutional LOIs and their terms.
The LOI outlines the terms and conditions of the purchase agreement, though it does not include all of the legal language, such as representations and warranties, indemnifications, etc.
Most LOIs contain an exclusivity clause or “No Shop” agreement, which prevents the seller from accepting any other offers while the LOI is in effect.
Negotiation
While the LOI is not the final purchase agreement, it locks in the terms and conditions of the purchase agreement. Therefore, careful negotiation of the LOI is critical because it establishes the framework for the entire transaction. This is why you need experienced lower-middle-market business brokers representing you.
The final purchase agreement will be drafted by the buyer’s attorney after due diligence is complete. Your attorney will review and redline this document. It is not uncommon to go through several revisions before it is finalized.
Due diligence begins after an offer or an LOI has been accepted.
On larger transactions, the due diligence timeline can range from as little as 45 days to as long as 90 days, depending on the type of buyer and the complexity of the transaction.
QofE is a key part of due diligence for transactions valued over $10 million. While we are experienced lower-middle-market business brokers specializing in lower-middle-market M&A transactions, QofE is performed by an independent accounting firm on behalf of the buyer.
This involves a thorough examination of the company’s financials, including tax returns, bank statements, accounts receivable, accounts payable, the balance sheet, and accounting practices.
Additional Reviews
While not essential, having reviewed or audited financial statements from your CPA firm is very helpful in the due diligence and QofE process; it can help streamline buyer reviews and increase confidence in the company’s financial reporting.
Many transactions also include commercial due diligence and legal due diligence.
- Commercial due diligence is the buyer’s review of the industry and market, the company’s competitive position, and often, projections for the industry and company.
- Legal due diligence is performed by attorneys representing the buyer and is a review of the company’s corporate entity, litigation history (if any), and other potential legal risks associated with the company and/or transaction.
Our role here as lower-middle-market business brokers is to help you prepare for the due diligence process and ensure it goes smoothly.
After due diligence is completed, the buyer’s attorney will prepare the first draft of the purchase agreement for review by your attorney. There will likely be a few renditions of the purchase agreement before it is finalized.
Once the purchase agreement is finalized, we are ready for closing. This may be done through a California-based escrow company or via the attorneys. It depends on the buyer.
All purchase agreements include training and transition assistance from the seller(s). This is negotiated in the LOI and specified in the purchase agreement.
What to Expect When Pacific Business Sales’ Lower-Middle-Market Business Brokers Represent You
After our initial consultation, our team will prepare a complimentary Market Value Analysis of your company and review the company’s market value and recommended asking price with you. As part of our lower-middle-market M&A advisory process, we also discuss current market conditions, buyer demand, and transaction trends relevant to your industry.
A common question we hear as M&A brokers is, “How do you find buyers?”
We have a large database and network of equity groups we contact directly via email campaigns, and direct outreach to targeted senior executives via LinkedIn. This is one of the perks you get when you partner with lower-middle-market business brokers with over 20 years of experience.
We also use business-for-sale websites, including a platform exclusively for private equity groups and institutional-industry investors.
We send targeted outreach to firms whose profiles indicate interest in your company’s industry and size. Our initial contact includes a non-confidential teaser flyer with a link to request an NDA.
Our outreach consistently generates a large number of inquiries, and after the NDA is signed, we arrange our initial meeting with each prospective buyer.
The CIM is essentially a confidential prospectus for your company. It is sent to prospective buyers after they have signed a Confidentiality Agreement (NDA) and provided a buyer or firm profile. The CIM is a critical component as it is the prospective buyer’s first in-depth look at your company.
Our lower-middle-market business broker firm prepares comprehensive CIMs which include a company overview & history, explanation of the company services and products, customer concentration-profile (redacted – no names), financial statements, staff list (no names), equipment list, etc.
The CIM intends to provide prospective buyers with sufficient information to determine if the company is a good fit and make the decision to move forward.
Getting a great offer for your business is just the beginning; then comes the realization of the taxes that may come with it.
Our firm works with expert tax strategy advisors who offer several tax strategies to defer and minimize taxes on the sale of your business.
Tax planning should not be overlooked or left until the last minute. As well-connected lower-middle-market business brokers, we can refer you to our network of tax strategy experts for a free initial consultation.
The most critical part of our work as M&A brokers starts with the LOI or offer.
We facilitate the transaction process with you (the seller), the buyer, and the buyer & seller’s advisors, keeping everyone on track throughout the process.
LOI’s and purchase agreements from Private Equity firms and large institutional investors are very different from ordinary small business purchase agreements.
These buyers have unique terms in the agreements that require experience in these types of transactions. Our firm is very familiar with the many deal structures and knows how to negotiate favorable terms for the acquisition of your business.
As seasoned lower-middle-market business brokers, we are also well aware of the pitfalls and problematic terms that often arise and know how to negotiate and avoid them.
Lower Middle Market (LMM) transaction due diligence is often complex and very detailed. We are experienced in facilitating the LMM Due Diligence process and keeping it on track.
A comprehensive QofE (Quality of Earnings) review by an independent accounting firm is a certainty. QofE is a thorough review of your company’s financials, tax returns, A/R, A/P, and accounting practices. QofE can take as little as 45 days or up to 90 days, depending on the complexity of the business financials.
Due Diligence will also include a commercial review of the company’s market and business, as well as a legal review of the company’s corporate records, past litigation (if any), and compliance.
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