M&A Marketplace
A Different Way to Buy & Sell IT & Engineering Staffing Firms
For many firms, the options to sell are not optimized to net the owners maximum value. Financial buyers such as private equity firms are typically not interested in small and many smaller mid-sized companies. In many cases, owners are left to rely on ‘word of mouth’ to find a buyer—an approach that neither maximizes exposure to a large enough pool of potential buyers necessary to command the highest possible price nor preserves confidentiality. Where investment bankers and M&A brokers will work with a firm at all, their fees for firms of this size are extraordinarily high, starting at $250,000 plus a $10,000 per month retainer.
The obstacles confronting sellers creates the corollary problem for buyers: no access to a ready pool of companies for sale. TechServe Alliance Services Corp. has created a better way . . .
Creating a New Marketplace
Drawing upon the vast TechServe Alliance network, we have access to a large group of prospective buyers: other staffing firms. By expanding the pool of potential buyers to include firms that may not have previously contemplated acquisition and dramatically reducing a seller’s cost to only $7,500 — a fraction of the cost typically paid by sellers to M&A brokers, we can help smaller firms maximize their net proceeds on sale.
To help guide owners through the process, we have assembled a team of IT & Engineering Staffing industry veterans with transactional experience and deep knowledge of how to position a firm to achieve maximum value on sale. Additionally, using the collective buying power of the program, we have arranged for discounted rates for legal services with Becker LLC, a law firm with significant M&A experience in the staffing industry. For sellers, legal costs are a set fixed fee based on deal size.
Learn About the Designated M&A Marketplace Law Firm
By creating a large pool of qualified buyers competing for the opportunity to acquire IT & Engineering Staffing firms along with low fixed advisory and legal fees disclosed upfront, owners significantly increase the likelihood they will maximize net proceeds from the sale of their company on favorable deal terms.
Sellers: How it Works
We have developed a simplified four step process empowering sellers to make an informed decision along with identifying those actions necessary to prepare for a sale and optimize the sale price and deal terms. While the process is designed to take a firm “to market,” owners are under no obligation to proceed with subsequent steps and may pause the process at any time. Both members and non-members are eligible for the program.
Step 1: Initial Assessment: No Cost
During this initial phase of the process, using a brief questionnaire and during the course of one to two telephone calls, a TechServe advisor will assess an owner’s readiness to sell, motivations and expectations—often neglected considerations. There will also be a general discussion of the marketplace and an informal discussion of valuations. All communications will be kept strictly confidential.
Step 2: Valuation Analysis: Cost $5,000
In the second phase of the process and upon entering into a Non-Disclosure Agreement (NDA), a TechServe advisor will perform an in-depth analysis of all attributes of the business including, but not limited to financials, client profiles, geographic footprint, internal team composition, and service offerings among other factors that impact valuation. A summary report will be prepared which includes an estimated valuation range and supporting analysis.
Step 3: Preparing for Sale & Maximizing Enterprise Value: Cost $5,000
Depending upon a Seller’s time horizon, Step Three will proceed along one of two different paths. If a Seller is interested in bringing his or her firm to market in the near term, TechServe will create the documents necessary to market the firm to prospective buyers. These documents include a Teaser—a one-to-two-page overview of the firm without identifying information and a Confidential Information Memorandum (CIM)—a more in-depth overview of the business and its financial position made available to prospective buyers after they have entered into an NDA. If a Seller is not ready to ‘go to market’, TechServe can undertake a ‘readiness to sell’ assessment of the firm. Using industry-specific due diligence items as a guide, a TechServe advisor with deep IT & engineering staffing experience will identify any deficiencies as well as opportunities to enhance enterprise value. The analysis will also include consideration of potential deal structures.
Step 4: Selling Your Firm — The TechServe Alliance M&A Marketplace: Cost $0
While preserving confidentiality, the TechServe team will reach out to its vast network to market your firm to potential buyers. In addition to expanding the number of potential acquirers who would compete for the opportunity to buy your firm, the TechServe program also shifts most fees to the buyer—a major innovation in the way IT & Engineering Staffing firms are bought and sold. Sellers will not pay any advisory fees beyond the $10,000 for the services in Steps 2 & 3.
Given the limited options available to owners of smaller firms interested in an exit, TechServe has created an innovative “Marketplace” that will bring interested buyers and sellers together.
For buyers, TechServe has both expanded the pool of potential sellers and eliminated a buyer’s up-front risk with no fees due until a firm has identified a potential acquisition target. Because sellers are required to go through a four-step process that includes an objective valuation analysis and guidance on actions necessary to prepare for sale, TechServe has created an environment that increases the likelihood deals will close.
Once a prospective seller completes the valuation and assessment process and decides to move forward with ‘going to market’, TechServe will then match the seller with interested buyers based on the pre-identified preferences of the parties.
Sellers ultimately control which companies they wish to engage with as a prospective purchaser. If a seller authorizes TechServe to engage with a prospective buyer, the prospective buyer’s representative will be asked to enter into a Non-Disclosure Agreement (NDA). With permission of the seller, TechServe will release information to allow a prospective buyer to evaluate the company for sale.
TechServe will work with buyers as part of its efforts to create a market for prospective sellers. However, to avoid conflicts of interest, during any negotiations, TechServe will only represent the prospective seller. As part of the process, sellers agree they will neither market nor negotiate for the sale or merger of their companies other than through TechServe for the duration of the engagement and for one year from the last communication with a prospective buyer that took place during the engagement, whichever is later.
As a major innovation in the buying and selling of staffing firms and recognizing buyers greatly outnumber sellers, TechServe has dramatically lowered the cost for sellers with the goal of encouraging more firms to consider a potential sale using the ‘Marketplace’ process. For participating buyers, TechServe has expanded the pool of potential sellers and eliminated upfront costs and risk with fees only payable upon identifying a potential acquisition target and closing a deal.
- Upon finding a potential acquisition target, buyers compensate TechServe for its role in creating a market and facilitating the transaction.
- Upon submitting a Letter of Intent (LOI) to a prospective seller, a buyer pays $1,000 ($4,000*)
- If a buyer obtains a fully signed LOI, a buyer will pay an additional additional $4,000 ($6,000*)
- Upon a deal closing, a buyer will pay a success fee based on the transaction value.
*Buyers that are not TechServe members paying dues on an annual or quarterly basis pay higher fees and will only have access to seller information after members have reviewed and considered the opportunity.
With complete upfront transparency, TechServe has significantly reduced both transaction costs and risk.
For Sellers:
- Step 1: Initial Assessment: $0
- Step 2: Valuation Analysis: $5,000
- Step 3: Preparing for Sale & Maximizing Enterprise Value: $5,000
- Step 4: Selling Your Firm — The TechServe Alliance M&A Marketplace: $0
For Buyers:
- No upfront cost to participate until a buyer identifies a potential acquisition target
- Upon Submitting a Letter of Intent (LOI) to a prospective seller, a buyer pays $1,000 ($4,000*)
- If a buyer obtains a fully signed LOI, a buyer will pay an additional $4,000 ($6,000*)
- Upon a deal closing, the buyer pays a success fee based on the transaction value.
*Buyers that are not TechServe members, paying dues on an annual or quarterly basis, pay higher fees and will only have access to seller information after members have reviewed and considered the opportunity.
As a Seller, if I begin the process am I obligated to go forward and sell my company?
Not at all. At any point in the process, you can decide whether you want to proceed with a subsequent step.
As a Seller, can I participate in Marketplace without going through the four step process?
No. We believe all steps in the process are critical to a successful transaction and achieving the highest possible valuation. Every firm is different. The process is designed to assess how the market is likely to view your firm, identify any impediments to selling, as well as make recommendations on actions that could enhance enterprise value prior to sale. Fully informed owners who have taken the steps necessary to prepare their firm for sale also demonstrate a seriousness of intent enabling us to attract a broad pool of serious buyers-–critical to commanding the highest possible price. To make the process accessible to all, we have designed the program so the cost to sellers is extremely modest — a fraction of the fees charged by traditional investment bankers and M&A brokers.
Will TechServe assist and provide guidance if I have already identified a buyer for my company?
Yes. We offer Sell-Side Advisory Services. Please contact us to discuss how this works and the applicable fee structure.
Who does TechServe represent in the transaction?
While TechServe will perform a role in creating a market by bringing together buyers and sellers, TechServe will exclusively represent the seller in providing advice during the transaction to avoid any conflict of interest.
Do I have to be a Techserve Alliance member to participate in the Program?
Both members and non-member who are considering the sale of their company are eligible to participate in the ‘Marketplace’. For buyers, while both members and non-members may participate, companies that are not TechServe members paying dues on an annual or quarterly basis will only have access to seller information after members have reviewed and considered the opportunity. Non-members will also pay higher fees as a buyer.
Will TechServe assist in valuation and guidance if I don’t want to “go to market”?
In some cases. Call us to discuss your particular situation and the applicable fees.
What other professionals should be involved in the transaction?
Parties are also encouraged to retain trusted advisors including attorneys and accountants. TechServe has arranged for discounted rates for legal services with Becker LLC, a law firm with deep M&A experience in the staffing industry. For sellers, Becker has agreed to provide a bundle of services on a fixed fee basis reducing the seller’s transaction costs.
