Selling a private company can, in many ways, be easier than selling a public company. The assumption, of course, is that you are seeking to sell the entire company. Here are some of the key differences:

• Shares are “traded” openly, therefore a small fraction of ownership is relatively liquid.
• The share price dictates the market value of the company.
• Disclosure requirements are more involved and burdensome for public companies being sold.
• The Board of Directors must approve a sale based on the best interests of the shareholders.

• No disclosure requirements (i.e. publicly).
• Usually easier to sell all of your company than it is to sell a portion.
• Decision largely rests with majority shareholders to sell (- subject to your shareholders’ agreement. If in doubt, refer to your attorney for advice).
• Since no shares are traded, an owner must establish the value (i.e. asking price) of their business through other means. Consult with a valuation specialist, a business broker, or your accountant.

How are private companies sold?

1. Typically, private companies will engage an M&A Advisor, to assist them throughout the sale process. The process then begins by collecting financial information and other background information. The broker will assist you in establishing a price for your business.
2. A advisor will then typically craft marketing documents that detail your business and execute a marketing strategy to locate qualified buyers. This marketing phase can range from several weeks to many months, based on such factors as the complexity of your business, the “niche” of your business, and of course how well it is priced.
3. Once a potential buyer or buyers are found, the M&A advisor will help you negotiate a formal offer on your business. This offer is often known as a Letter of Intent or a Term Sheet. This document lays out the general terms and conditions under which the buyer intends to purchase your business. It is often subject to “contingencies,” – i.e. the exceptions to the offer.
4. The next phase, Due Diligence, is focused on verifying the facts presented regarding your business (i.e. financial performance, sales, agreements, etc) and removing the contingencies placed on the offer. A good advisory firm will help marshal you and the buyer through this process, ensuring that focus remains on getting to a closing.
5. The final phase is the Closing. It is at this point that you and a buyer will enter into a “Purchase and Sales” agreement, which is the official sale document between the parties. Consideration (i.e. money) and Title will transfer, and the sale is complete.

Talk to a Clear Rock professional about getting your own business started with the process.