In this article Mark takes us through his incredible journey from the moment following the handshake, to closing the deal. Read on to learn about what is really involved when selling your business.

When the hard work really starts

If you imagine selling a business, you might see it as a series of steps from agreeing on a price to signing on the dotted line. But so much more happens after that point. When the agreement to sell is signed, the work gets even more intense.

From when we first received inbound interest to acquire Nexient, to the end of our formal sales process, is a  total blur for me. When we’d finally secured a purchaser, I was excited and relieved. I thought we were finally at the end of a long and stressful process - signing an agreement to be acquired. I was wrong.

I didn’t realize how much work was about to come my way. Sure, we now had certainty around what we were doing, so the stress levels went way down, but the workload went up. We had to keep the company firing on all cylinders while also working our way to closing the sale.

Announcing the deal

The first order of business was to have an all company meeting to announce the acquisition by NTT DATA. We had kept the circle of people who knew about the deal to a very small number. In a company of over 1000, fewer than 10 people knew about it. I wasn’t at all sure what the reaction would be from the broader team.

Add to this the fact that one of the leaders from NTT DATA would be joining the call. Our all company meetings tended to be quite casual (a leftover from the early 2020 sessions we had during COVID). I really wasn’t sure how our newcomer would blend in with the overall tone but it was a huge success. The NTT leader adopted our style and fit right in, making it clear that we’d been lucky to have them as our purchaser. Our cultures were a good match.

At the end of the call everyone seemed excited about the deal. They were proud to have helped create a company that was worthy of being acquired as a top performer in the market.

A unique position

It was time for us to become part of a bigger machine. Throughout the process I’d been told by bankers that in our space of more than 10,000 firms, there were never more than five firms with revenue between $100m and $1b. There were a couple of reasons for this:

• If you’re growing fast enough to get past $100m in revenue, you've created an offering that the market values. The larger firms are always looking at these high-growth businesses to see what new offerings they can add to their portfolio. The best way to add them, is through acquisition.
• Once a company passes $100m in revenue, it’s viewed as having created a machine. Smaller firms may have a great offering, but usually you need to keep the founders involved to really be able to continue to offer that service in the marketplace. Once the company goes over $100m, it has to have created a scalable, repeatable service offering.

Administration overload

There was so much admin to get through to close the deal. One of the most time consuming, was the need to go through every third party contract we had. NTT DATA’s lawyers did a full review of all vendors and clients. We'd always tried to include in our contracts with clients the right to assign the contract to an acquirer in the event we were bought. It always seemed a bit abstract to negotiate for this as most of our clients were Fortune 500 enterprises and we were a relatively small player. We actually had a number of clients who hadn’t agreed to this term. That meant that we had to go out to each of those clients and ask them to sign a new agreement saying that they would transfer the Master Service Agreement to NTT DATA. It took a lot of work to get all of these clients to finally agree to amend their contracts with us, but there wouldn’t have been a sale without it.

We also had to maintain the performance of the company for each closed month and quarter during this period. This reached back to the beginning of the process when we had shared our projections. Everyone was watching closely to see if we’d continue to perform. Luckily, our business was strong and the market was really good at the time for our product-team offering and we were able to make our numbers. It wasn’t without some bumps in the road though. We had one project that wasn’t going well at all - most software development firms do. In this case, we had a fixed fee contract worth about $800k in revenue. As we got into it, we realized that we had underestimated the amount of work required to deliver what we promised. Ultimately, we spent about $1.8m delivering it. Needless to say, losing $1m on a $800k deal is a complete disaster, but we saw the situation developing throughout the whole process and had updated the bidding parties along the way. I think what saved us during this process was good communication, healthy overall financials despite this mess, and the fact that every services firm with over $100m in revenue will have at least one bad client project at any given time.

The final push

Another fascinating aspect of the deal was seeing how it was all finally executed. There were a large number of steps that had to be undertaken in a very specific sequence to finalize the transaction. Here are some of the key items that had to be done within mere minutes of each other as we closed the deal:

• Move the cash out of the company - services companies are typically sold as “Cashless and Debtless.” We were in a great position that we didn’t have any debt, so this meant transferring out the cash on the balance sheet to the original investors just before moving forward with the deal.
• Have the board of directors resign - for the company to be fully acquired, we needed the existing board (including me) to resign our seats. This is typically done minutes before the acquisition is finalized so that the company isn’t without leadership for any period of time.
• Execute agreements for the purchaser to buy all of the seller’s outstanding shares - We had a fairly large number of people who held shares in Nexient. Each of them had to sign an agreement that they would sell their shares in the acquisition. These agreements were finalized at the last minute as we closed the deal.
• Fund payments to each of the shareholders in the company - once the agreements to sell the shares were finalized, the payments to each shareholder had to go out immediately. This took a lot of preparation so that we could get all the payments out in a few minutes on closing.
• Have the employees sign new employment agreements with the purchaser - each of the executives had signed their employment agreements ahead of closing. They were countersigned as we went through closing.
• Issue a press release to announce the closing of the deal - NTT DATA issued a press release to let the market know that the deal had been finalized.
• Announce to the business that the deal has formally closed - we held another all company meeting to let people know that everything had closed. Since we had announced the deal earlier, this one was way less dramatic. The employees had a lot of detailed questions on how things would work and it was a good back and forth conversation.

There was also a “Closing meeting” where we executed all of the agreements and payments over the course of about 45 minutes. I was the only one from Nexient who attended, so I kept the executive team up to date via our group chat as each item went by. People seemed to enjoy the minute-by-minute updates. This was a big deal for all of us.

Looking back

When the dream to sell your business becomes a reality, so too does the process to complete the sale. Everything becomes very very real. Be prepared for a lot of hard work to-ing and fro-ing as every single “t” is crossed. I learned a lot throughout the process and would definitely apply these learnings if I were to go through it again:

1. Identify and work around bumps in the road - as I learned about the project that was going south, I was initially concerned that it might blow up the deal. Fortunately we’d been transparent about it throughout the process so people seemed to react well to the information. Everyone we were talking with was very experienced in delivering software consulting services and nobody seemed to freak out about the issue. I think that trying to keep quiet about it would’ve painted us a a way less favorable light.
2. The team was really proud to be acquired - I wasn’t sure if the broader team would be sad to be giving up our smaller company status when we announced the transition, but they were genuinely proud of what we had accomplished at the announcement. The culture changed slowly over the next two years, but the sentiment at the time of the deal was very positive.
3. Keep pushing through the required actions - I've never had such a huge workload as the one I had from the start to finish of this process. Managing the deal and the day-to-day business was a massive challenge. Thanks to my extremely strong leadership team, I was given enough space to focus on the deal and just push through. It was probably good that I never really knew how long it would take or how much work it would be. I got through it though and was really happy as we came out the other side.

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