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A business owner, the lone shareholder, is looking to retire and sell the family company where the day-to-day operations are managed by his son. The owner wants the best price for the company and for his son to stay on.

It’s a common situation among business-owner clients as they near retirement. Advisors can help with the process by introducing clients to mergers and acquisitions (M&A) specialists and by managing the sale’s proceeds, which can be worth millions. Understanding the complexity involved with selling a business can allow advisors to become more competent sounding boards for clients.

Here are highlights of a sale we completed for an Ontario-based full-load, cross-border trucking company.

The situation

The company had one shareholder who played a relatively small role in the day-to-day tasks of the business. Operations were left to his son, who acted as general manager, and his wife, who worked as the bookkeeper. The owner and his wife were looking to retire while the son wanted to continue in his role under new ownership.

The process

Once AIM was hired to sell the business, we put together an information request list with questions about the company’s history, business operations, employees, organizational structure, fleet information, growth prospects, financial data and more. This was used to prepare a confidential information memorandum (CIM), which is a 20- to 30-page marketing document describing the company for sale.

While the family was able to answer most of our questions, we found that much of their financial data was vague and lacking detail. We realized this would not be acceptable to potential buyers so we convinced the owner to hire their existing accounting firm to assist with delivering the information required. With the firm’s help, we obtained sufficient granularity to complete the CIM. We also prepared a targeted buyer list with 17 likely names. This included 10 strategic/industry buyers and seven private equity firms.

Once the owner approved the list, we contacted the potential buyers. This included sending out one-page summaries of the business without naming it. If interested, potential buyers would then sign confidentiality agreements. Once those were received, we emailed a copy of the CIM. After prospective buyers reviewed the CIM, we met with five parties. Those meetings resulted in three letters of intent (LOIs). Although each LOI was strong, one— from a strategic buyer in Montreal backed by a private equity firm—stood out. The buyer had a mandate to grow by acquisition and ended up making seven acquisitions that year. Their LOI offered the highest price and they were willing to keep the son on as general manager for a three-year term. The owner agreed and signed back the LOI.

During the next stage of the sale process, due diligence, we ran into issues. The private equity firm started to get more involved and requested increasingly detailed information. The owner was also confused about the treatment of working capital and the assumption of certain leases post-closing. He thought all the receivables in the business should belong to him and that the buyer should assume all outstanding leases.

These issues made negotiations difficult, but we eventually compromised. The owner would leave a customary amount of working capital in the business (as is the norm in all M&A deals) and the private equity firm would assume the leases (which they considered as debt, effectively increasing the company’s purchase price). The deal closed soon after. The owner received a premium price for the company and the son continued to run the business.

The advisor’s role

Understanding the various steps and potential challenges involved in selling a business will allow advisors to counsel clients throughout the process. In the meantime, they can also prepare a financial plan anticipating the completed transaction.

Mark Groulx is the president and founder of AIM Group Canada, a Toronto-based mergers and acquisitions advisory firm specializing in the sale of privately-owned businesses. Reach him at