Sell-Side M&A Checklist

Sell-Side M&A Checklist: 21 Ways to Maximize Business Value before Selling

Recently I was introduced to the founder of a company that he has successfully ran for 17 years. Hearing I’m an M&A guy he said “I want to sell my company.” I asked how much pre-market preparation had he done. Had he done it right? Has he taken the right steps with a Sell Side M&A Checklist to maximize business value before selling?

Once you allow buyers to check out the opportunity to potentially acquire your business, the cat’s out of the bag. First impressions have already been made.

If you don’t take an active role in showing them the business want them to see, you may not like their views on valuation.

So I created a sell-side M&A checklist: 21 ways to maximize business value before selling.

If you’re a founder, a CEO or an investor in a privately owned middle market business and you are thinking about selling, please consider the upside of preparation. Your top priority should be maximizing value before you go to market.

There are a ton of avoidable deal breakers that you may not be aware of.

Selling your company is complicated and you have to do it right the first time to maximize value. For you, we have prepared a unique sell-side M&A checklist: 21 ways to maximize business value before selling.

Preparing Early is Key to Success when Considering Running a Sell-Side M&A Process

There are three major categories that every business is built on:

  1. Product and/or Service
  2. Finance
  3. Organization

Developing, evolving and maintaining a good fit in each of these categories and the market you serve is imperative to the longevity of your business.

There are many factors that contribute to a business’s long-term success. Some of the most important include:

  • A strong business model. A business model is a blueprint for how a company creates, delivers, and captures value. A strong business model is essential for any business that wants to survive long term.
  • A clear and compelling value proposition. A value proposition is a statement that explains why customers should choose your business over your competitors. A clear and compelling value proposition is essential for attracting and retaining customers.
  • A strong brand. A brand is a set of associations that customers have with your business. A strong brand can help you attract new customers, build customer loyalty, and charge premium prices.
  • A talented and motivated team. The people who work for your business are its most valuable asset. A talented and motivated team is essential for any business that wants to succeed.
  • A strong financial foundation. A business needs a strong financial foundation in order to survive long term. This means having enough cash on hand to cover unexpected expenses, as well as a healthy profit margin.
  • A willingness to adapt and change. The business world is constantly changing. In order to survive long term, businesses need to be willing to adapt and change with the times.

By focusing on these factors, businesses can increase their chances of surviving long term.

Here are some additional tips for long-term business success:

  • Focus on your customers. The customer is always right. Make sure you are always putting your customers first and meeting their needs.
  • Be innovative. The market is constantly changing, so you need to be able to innovate and adapt your business to meet the needs of your customers.
  • Be efficient. Make sure you are running your business as efficiently as possible. This will help you save money and improve your bottom line.
  • Be profitable. You need to make a profit in order to survive long term. Make sure you are pricing your products or services competitively and that you are controlling your costs.
  • Be patient. It takes time to build a successful business. Don’t expect to become a overnight success. Just keep working hard and stay focused on your goals.

Maximizing value when selling a company requires careful planning and execution. Here are 21 strategies to help you achieve that goal:

  1. Prepare in advance: Start preparing for the sale well in advance to ensure your company is in the best possible shape.
  2. Clean up financials: Ensure your financial records are accurate, organized, and transparent.
  3. Increase profitability: Focus on improving profitability by reducing costs, increasing efficiency, and optimizing operations.
  4. Diversify customer base: Avoid overreliance on a single customer by diversifying your customer base.
  5. Strengthen management team: Build a competent and experienced management team that can demonstrate the company’s ability to operate independently.
  6. Intellectual property protection: Safeguard your intellectual property through patents, trademarks, and copyrights.
  7. Strengthen contracts and agreements: Review and update contracts, agreements, and licenses to ensure they are favorable and protect the company’s interests.
  8. Develop growth opportunities: Identify and pursue growth opportunities that can increase the company’s value.
  9. Build recurring revenue streams: Focus on generating recurring revenue, such as subscription models or long-term contracts.
  10. Enhance brand and reputation: Invest in marketing and branding initiatives to enhance the company’s reputation and brand value.
  11. Streamline operations: Optimize processes and streamline operations to increase efficiency and reduce costs.
  12. Foster strategic partnerships: Seek strategic partnerships or alliances that can provide access to new markets, technologies, or resources.
  13. Develop a strong sales pipeline: Focus on building a robust sales pipeline to demonstrate consistent revenue generation.
  14. Leverage technology: Embrace technological advancements to enhance productivity, innovation, and scalability.
  15. Reduce dependencies: Minimize dependencies on key suppliers, customers, or employees to reduce risks and increase the company’s value.
  16. Enhance customer relationships: Strengthen relationships with key customers, improve customer satisfaction, and increase customer retention.
  17. Demonstrate growth potential: Clearly articulate and demonstrate the company’s growth potential to potential buyers.
  18. Seek professional advice: Engage experienced advisors, such as investment bankers, lawyers, and accountants, to guide you through the sale process.
  19. Confidentiality and discretion: Maintain confidentiality throughout the sale process to avoid disruptions to the business.
  20. Consider different buyer profiles: Explore different buyer profiles, such as strategic buyers, private equity firms, or individual investors, to maximize value.
  21. Negotiate effectively: Engage in skillful negotiation to maximize the sale price and deal terms, while considering the long-term interests of the company.

Remember that the sale process can be complex and time-consuming, so it’s essential to seek professional advice and plan accordingly to achieve the best outcome.

One of the biggest challenges facing owners of privately held businesses is the ability sell their companies at maximum value. In order to successfully sell owners need to plan ahead. Key components to a successful sale include strategy, finance and operations.

It is a lot of work to sell your company and more stressful than most sellers anticipate. To get the maximum enterprise value for what you have built it is important to take the right steps before you start the process. The most effective way to maximize value? Use an M&A advisor to prepare you and your company, prepare the vast array of requisite documents and run the sell-side M&A process.

Related: What to Expect from your M&A Advisor

  1. Six planning steps every entrepreneur should do now to be in a better position to sell
  2. Do business with potential buyers
  3. Reach out to potential buyer decision makers (CEO’s)
  4. Create a data room structure for key documents and feed it
  5. Messaging – what do you have that they care about – articulate this
  6. Be vigilant about non-competes, IP assignment etc.
  7. Clean-up & document- client (signed contracts), founder, and employee issues

Start early and find a good M&A advisor – it’s a longer and more complicated process than most entrepreneurs may think.

  1. Clean-up all your issues – Client, founder, and employee to start with, every company has them, address and fix issues now in the planning process.
  2. The list – Create an exhaustive list of potential buyers. Start with existing partners and customers but remember that this is just the beginning. Take a 10,000-foot view of the core value your technology provides. Scan the globe for companies that could benefit from the team/talent/skills and the product functionality/IP/technology that you have to offer.
    Research potential companies by reading through annual reports, websites, news releases and blogs to find holes in their current offering that you can fill. Find companies with a strategy that includes offering what you already do today.
  3. Find the right buyers – Look within the company to find the right people to speak with and their contact information. Would you consider offshore buyers? There are thousands of successful and wealthy companies and individuals in other countries who are interested in buying US technology companies.
  4. Data Room – Start to assemble a data room with all of the documents that a potential buyer will need to see – this includes Contracts, Corporate records, Employee agreements (employment, IP assignment, non-competes), Financials, Insurance, Market information, Product information, Leases and Taxes. Initially the goal is to organize the information into electronic files and identify any missing gaps.
  5. Messaging – Create a pitch deck that clearly articulates a story that resonates with the intended audience. Paint a picture of what a better world would look like for them with what you have. Address needs on their part first and then walk them through what you do and who you are. Create a messaging matrix – these messages need to be crisp, concise and relevant to your potential buyers (CEO, CFO, CMO, VP Engineering, Corp Dev.). The first step is to create interest on their part so that they will engage in a deeper dialogue. This is critical.
  6. Vigilance – Make certain you have in place non-competes, IP assignments, yes be vigilant when it comes to this. Create a suitable NDA for use with interested parties and be sure to have a good attorney ready before you begin – this is a critical role. They will be the primary interface with the acquirer’s attorneys and this can make or break a deal.
  7. Selling a company takes time and expertise. Find a good M&A advisor, someone you can trust and has the credibility to help you get the right deal and to get it done. Someone who understands what it’s like to walk in your shoes.

Clients hire us with several goals in mind: to maximize shareholder value, ensure buyer viability and achieve the best possible terms with confidentiality, speed and minimal burden on ownership and management.

Maximize Shareholder Value

Our rigorous analysis, professional marketing materials and superior negotiation abilities help to ensure the best possible deal for our clients.  Each step of the marketing process is tailored to our client’s particular situation and designed to exploit competition among potential buyers.

Negotiate the Best Possible Terms

During the negotiation process our clients are shielded from the often emotionally tense discussions with the buyer.  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.  Our professionals 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.

Ensure Buyer Viability

When buyers stretch from a pricing perspective, problems related to financial performance and projections, accounting, customer concentration, employment agreements, non-compete agreements, industry downturns, etc. are all magnified.  Our track record of dealing with such issues to keep them from becoming deal breakers is attributable to our team of experienced professionals.

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 Deal 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 marketing process it is essential that our clients continue to achieve the aggressive strategic and financial goals set by management and communicated to potential buyers.  Accordingly, our collaborative role is one that emphasizes minimal burden on the owner (and those members of the staff aware of the sale) in order that he or she may continue to run the business.

Refresh your Corporate Image

Industry standards, style and marketing tactics change quickly these days so its important that buyers have a positive perception of your brand identity. Alignment Media can give you some pointers on what’s currently trending in digital marketing.

©2023 ALIGNMT LLC | Financial Management | Mergers & Acquisitions | Investor Relations


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