How to Manage Realistic Objectives When Selling

When business owners hire us to help them sell their companies, we start by establishing several goals: maximize shareholder value, ensure transaction viability and achieve the best possible terms with confidentiality, speed and minimal burden on the owners and company management. Know where you can realistically land before taking the leap.

Maximize Shareholder Value

Valuation is an art, not a science. And it varies in ways we often don’t understand from buyer to buyer. The one truth is that the market, the money, is always right so don’t fight it. Knowing this, we help business owners emphasize the value enhancing factors unique to their businesses so we are certain the market understands our view and can factor this in to their equation. We find and accentuate these variables in the financial statements, product and service offerings, operations processes, and other elements unique to the company. We also need to propose why the business is positioned to flourish under new ownership.

Then comes the hard part. We prepare a rigorous financial analysis including normalized historical financial statements, financial projections based on actual economics, competitive analysis and a comparable public and private transaction valuation so our clients have realistic expectations when deciding to engage, and aren’t surprised at any step along the journey. Making sure to emphasize each of the unique value enhancing elements and competitive advantages of a company in professionally prepared sale materials helps to ensure the best possible deal for sellers. After all, assuming a buyer is going to see your business through your eyes, and value it accordingly without influence, is insane.

Ensure Transaction Viability

The best odds in taking business risks are 49% in your favor and 51% in failure. Don’t be under prepared. Rolling the dice and going out there to see where things shake out when you really do want to sell is going to end up badly. First, anyone you approach with the notion of buying your business is going to want to know why you’re interested in selling. Their inclination will likely be that the business is in trouble. And no one is interested in buying a business in trouble for a premium valuation, if at all. So don’t make this impression.

If you really do want to sell, impress upon those potential buyers you decide to approach they have a unique opportunity and should consider it seriously. On the other side of the coin, make sure you approach only viable buyers, those that have the ability to engage and manage the acquisition process and financial wherewithal to make it happen.

Start with the end in mind and be aware of common mistakes made early in the process that impact value, structure or the viability of consummating a transaction at all.

Negotiate the Best Possible Terms

During the negotiation process many topics can be emotionally tense for sellers, but critical for buyers to settle.  Our experience negotiating transactions enables us to extract better pricing and terms than a business owner would otherwise be able to accomplish, particularly one  who has not previously been involved in a business sale.  We are experienced and comfortable negotiating for the best possible outcome, but know when to compromise in order to ensure the deal happens.  Meanwhile the relationship between our client and the buyer is unaffected, which is particularly important during the transition period.

Help Ensure Confidentiality

Confidentiality is interwoven with every step of our sale process to  avoid disruption of management and employees and to maintain positive relationships with customers and suppliers.  Everyone
requesting confidential information is required to sign a confidentiality agreement.  For competitors included in the process, we tailor our approach and marketing materials in order to ensure that sensitive information is not placed in the wrong hands.

Speed Up the Process

In deal making time is the enemy.  Hazards including economic changes or developments within our clients’ businesses or markets can befall a deal with the passage of time.  Therefore the
quicker the transaction and the greater the momentum we can foster, the lower the risk of failure to close.

Minimize Burden on the Owner

During the sale process it is essential that our clients continue to achieve their strategic and financial goals set by management and shared with potential buyers. Accordingly our collaborative role is one that emphasizes minimal burden on the owner and management team aware of the sale, in case the decision is made not to sell and continue to run the business. This happens often.

Your Decision

You’ve got to create options for yourself, your business and it’s employees when you’ve reached the critical pivot point of having a viable offer from a bona fide buyer that is ready willing and able to get the acquisition done. If you decide to sell, due diligence will uncover any inconsistencies from the expectations you set and could easily derail valuation, terms or the deal. So don’t create any situations you will have to ‘explain’.

Make an informed decision no matter which way you decide to go. Selling, or not selling will likely stick with you after the opportunity is taken or passed on. Don’t be surprised where you land, be prepared for it. How you prepare for it is up to you. Business is a journey. Along the way you face many challenges. Don’t take avoidable risks. Don’t go it alone.

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  1. […] you start the sell-side M&A process there are a number of things to prepare for. Establishing the seller’s objectives is the first step. Second, prepare a relevant list of M&A sale consideration topics for […]

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