Sell-Side Process Letter Agent

When to use

Use this when a sell-side process is moving into a bid round and the instructions to bidders have to be written. Typical triggers: calling for first-round indications after the information memorandum, or setting terms for final bids before exclusivity. Reach for it when the risk is offers arriving on incomparable bases, or a deadline that turns tension into a collapsed field.

What it does

It produces a process letter for a named round: what each bidder must submit and in what form, the price basis, the funding evidence and conditionality required, the expected mark-up of the draft agreement, the submission mechanics, and the seller's reserved rights.

Method

1. Fix the round and what it buys. Round one buys information, round two buys certainty.

   • A first-round indication should cost days, not weeks; loading it with legal work thins the field before you know who is real.

2. Define the price basis. Make offers comparable or they are not offers.

   • Enterprise value on a cash-free, debt-free basis against a stated normalized working capital target, on a locked box with a ticker or on completion accounts.

3. Demand the evidence of certainty. This separates a number from a bid.

   • Round two: an executed equity commitment letter, debt commitment papers, and no financing condition; name any stapled financing and say it is optional.
   • Require filings by jurisdiction with a timetable, approvals outstanding, and remaining diligence itemized with the days it needs.

4. Set the mark-up expectation. Ask for it once, in round two.

   • A blackline of the seller's draft in Word, a short key-issues list, and the bidder's warranty and indemnity position: limits, de minimis, retention.

5. Constrain the form. Comparable submissions are readable submissions.

   • A page limit, PDF signed by an authorized signatory, one named recipient, a stated time and time zone, and a validity period.

6. Reserve the seller's rights. Keep the door open.

   • No obligation to accept the highest or any offer, the letter is not an offer or a contract, the process may change, and no contact with management, customers, or staff except through the adviser.
   • Say how a pre-emptive bid will be handled, or you will improvise when one lands.

7. Hold the deadline, and extend for everyone or no one. Tension is the asset.

   • A quiet extension for one bidder leaks and kills the credibility of every deadline after it; one announced to all costs a week and keeps the field.

8. Rank on more than price. Certainty is priced, not assumed.

   • Anchor the reserve on the seller's BATNA — hold, refinance, dual-track — and score conditionality, financing evidence, and speed alongside the number.

Inputs

• The round, the bidder list, and the timetable to signing
• The cash-free debt-free convention and the working capital target
• Locked box date and ticker, or completion accounts mechanics
• The draft sale agreement and the issues the seller will not move on
• Regulatory analysis for the likely bidders, and any stapled financing
• The seller's BATNA and the approvals the seller still needs

Output format

• A round header: purpose, deadline with time zone, and the named recipient
• A numbered list of required contents, each stated as an instruction
• The price basis, with the working capital and leakage conventions spelled out
• Funding evidence and conditionality, including the no-financing-condition line
• Mark-up instructions: the blackline, key-issues list, and W&I position
• Submission mechanics, reserved rights, and the contact protocol
• Present the requirements in prose and numbered instructions, never as markdown tables

Example

For Northwind Packaging (fictional, illustrative) at LTM EBITDA of 60: six first-round indications came in between 8.0x and 10.5x, or 480 to 630, on four pages each. Four went to round two, where the letter added committed financing papers, a blackline of the draft, and a thirty-day validity period. Bidder A bid 10.2x, or 612, but kept a financing condition and two antitrust filings on a five-month timetable; Bidder B bid 9.8x, or 588, with no financing condition and a locked box three months before completion at a 6 percent ticker on the 388 of equity, worth about 6. That narrows a headline gap of 24 to 18, or 3 percent — thin compensation for a financing condition and a five-month tail, and a comparison only possible because the letter demanded the papers. Two bidders asked for an extra week: granting it to all four kept the field, where granting it to one would have leaked by Monday.