Sales, Mergers, and Change of Control
Diversicorp in conjunction with its strategic partners provide assistance to small company clients of either coaching or consulting services when the underlying company or its assets must sell or change its ownership structure in order to survive. This may be accomplished by a outright sale of the business or its assets; a combination with another company that provides synergies and reduces costs or where new investment will dilute present ownership and change the controlling party.
Timing is everything, and right now it’s a buyer’s market due to remaining constraints in financing. However, strategic, financial and distressed buyers do have plenty of liquidity and financing that can deployed had for the right transactions. Those acquirers are abundant but value conscious in this unsettled market. In addition, many displaced “Baby Boomers” are looking for companies as opposed to jobs and can prove to be good matches even for companies that are troubled but salvageable.
Strategic and financial buyers are actively looking to acquire companies that are performing well. Strategic buyers often place the highest value on a company – and private equity firms have significant liquidity available to invest in companies.
Because of our history in financing support and working with distressed companies, we have numerous connections to intermediaries, principals and direct equity funds that have interest in smaller companies usually with revenues between $8 and $25 million.
And once we identify and contact the right group of strategic or private equity buyers, merger partners or investors, DiversiCorp remains committed and works continually until our client receives the best fit, the best price or the most appropriate rescue for his or her company.
Timing and preconditions
Since our sell-side activities are limited to our clients with difficulties, we require the Comprehensive Business Survey (CBS) as a pre-condition to accepting an assignment. The results of it help us craft out documentation making appropriate disclosures and identifying the right solution.
We always obtain non disclosure and confidentiality agreements of those we disclose details we have derived and make no warranties on the disclosures in any way.
The CBS and documentary process takes between 10 days and two weeks and the costs of CBS is generally in line with the consulting services rate that is normally $2500-$9000.
If there is a buyer, merger partner or investor willing to initiate and execute a purchase, merger or investment, it is likely a requirement that the business can sustain due diligence through documentation and closing of 12-20 weeks. If the company is insolvent or not cash flowing, the timing may be accelerated but the number of interested parties and the price they will pay is likely to be substantially lower.
Fees
In addition to the cost of the CBS, our fee will depend upon the nature and size of the transaction but generally for sales or control investments the rate is 3-9% of the principal amount of consideration. For a merger, normally a flat fee can be negotiated. We normally require fees are escrowed in closing funds or with lender if the proceeds are repaying debt alone.
While not our core business our clients are afforded an integrated solution if or when it becomes apparent that the company cannot remain independent any longer. If DiversiCorp believes it must partner with an intermediary, all dealings will discussed and approved by our client.
