Read this before you sell your company
Right now there is a boom for company sales. Activity in the middle market has not been this high for decades, neither here in Europe nor in the United States. Both strategic and private equity buyers are looking for acquisitions, and many players are looking for a platform to either build an expansion on or a company to add to their existing business. In other words, it is the seller's market, which gives you unusually good opportunities for a potential sale. Here is an overall checklist of some of the most important points to keep in mind as you prepare yourself and your company for the sales process.
1. Always be ready
Do not delay in optimizing your business. When the opportunity arises, you must have already built up the value so that you do not lose valuable time. Maximize your sales and profitability already now, so you have something to lean on when the company enters the market. In addition, you create added value that comes in handy at the negotiating table when you close the deal.
2. Think ahead
Buyers are looking for potential. They are far more interested in possible ways forward, than the road that led here. Therefore, you need to communicate in an informed and credible way about your company's future, and what will drive growth. A common mistake is to focus on the background and leave it to the buyer to assess the vision and the company's future.
3. Know your value - and what drives it
Many owners have no real idea what the company is really worth, and why. Enough because factors such as multiples of revenue or EBITDA can be good as a benchmark, but it is far from enough for a fair valuation. A motivated buyer is often willing to pay a higher price under the right circumstances; such as that the business fits in, that there are synergies on both cost and business, a good reputation or customers that fit into an existing business cluster.
4. Avoid surprises
Every serious buyer will conduct a thorough due diligence before closing agreement. Surprises in that phase have a serious negative impact on the store. In that situation, you can count on a reduced price at best, unless the deal goes completely for nothing. You can avoid this by doing your own due diligence with an advisor, before entering the market. A serious and professional advisor makes it easier to ask the uncomfortable questions and see the difficult shortcomings before the sharp DD.
5. Stay focused right into the goal
You need to make sure that your business is developing in the best way even during the sales process. Therefore, it is important that you continue to run the company as if you would forever. Anything else would adversely affect several factors such as final price, future prospects and work climate.
6. Resource-secure sales process
The sales process itself is very demanding. A potential buyer expects immediate feedback, quick responses, meetings at short notice and more. When the buyer then starts his M&A process, many people are engaged at a high cost. Anything other than a strong commitment from you at that stage, risks lowering confidence in the company and creating additional costs for the buyer - things that can easily overturn the entire deal. To cope with this, you must have engaged and prepared advisers / agents and your own organization.
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