Our dedicated partnership team at Vacasa has worked with more than 60 vacation rental management company owners who have chosen to sell their business. We’ve spent countless hours navigating the sales process alongside owners, and know firsthand how complicated it can be to make such a life-changing decision.
We’ve worked hard to make the sales process as simple as possible—including the following cheat sheet of terms and documentation any seller can expect to encounter along the way!
Due diligence is first on the list, because it’s one of the earliest steps in the sales process. An interested buyer will conduct due diligence into your company: detailed research into facets such as preexisting debt, Better Business Bureau ratings, Google ratings, social media presence, and much more. The findings of this diligence will determine if your business is one the buyer finds financially or legally risky.
Non-Disclosure Agreement (NDA)
A non-disclosure agreement is a document outlining any confidential information a seller wishes to share with a buyer, but restricts disclosing any of the shared information with a third party. For example, you may put in your terms that the company you are in talks with may not share the contact information of your homeowners with anyone else within their company, or another third party. This ensures that if the sale of your business does not go through, your homeowners will not be targeted by them or another third party. You’ll want to make sure the buyer signs this document before you share any information about your business that cannot be readily known to the public.
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
Your EBITDA is a measure of your company’s overall performance—and you can easily calculate it yourself. It’s an equation that totals your earnings before interest, taxes, depreciation, and amortization. The buyer of your company will review your calculated EBITDA and typically discuss an offer relative to this number.
Letter of Interest (LOI)
A letter of interest is prepared by the buyer and sent to the seller for consideration, and documents that the seller and buyer have reached an agreement on price and major terms of the deal. A letter of interest is not a legally binding document, but gives the buyer and seller confidence to proceed with due diligence and negotiations before incurring legal fees and other acquisition related expenses.
A term sheet provides a high-level summary of the agreed-to terms and conditions of the transaction. The term sheet usually includes the purchase price and specifies what assets are included in the sale.
Asset Purchase Agreement (APA)
The asset purchase agreement is a legal agreement between you and the buyer that includes all details of the sale. It functions as the final governing terms of your sale, taking precedence over any previous terms agreed to in the term sheet or letter of intent. Typically, a buyer will have this document reviewed by their attorney to make sure they’re comfortable with the overall terms and conditions.
Whether you want to sell your company next month or in five years, it’s never too early to familiarize yourself with the process of selling. Preparation will enhance your company’s value—and make your life easier—when the time is right.
Vacasa’s Corporate Development team has helped more than 60 business owners navigate the sales process in national and international vacation rental markets. With these partnerships, our team has gained invaluable experience and knowledge that we want to share with you. If you have any questions about how to prepare to sell—or would like a free, confidential valuation of your company’s value—we’d love to hear from you! Please call us at 844-333-3789 or email firstname.lastname@example.org.
Contributed by Leslie Irwin.