These seven elements can severely impact the ease and value when it comes to selling your company…
1. Choose the Right Team of Advisors
You need these four members:
- M&A Professional Advisor
- CPA
- M&A Attorney
- Wealth Manager
Reasons You Need this Team:
- Position the company for maximum valuation
- Obtain negotiation direction
- Maintain a competitive timeline
- Understand the tax impact
- Create a future wealth plan
- Ensure all legal aspects are M&A grade
- Increase the likelihood of a successful transaction closure
2. Prepare for a Long Difficult Process
Even with the team of advisors representing you, you will feel overwhelmed and even accused at times. The buyer’s diligence can come across as an investigation. Also, owners often feel intense emotion around releasing their company. All of this is completely normal, but it will be more than imagined during the 9-12 month process.
3. Get Your Financial House in Order
Your operations are the primary consideration. Loose financial records and lack of reporting capability could decrease value.
Key considerations:
- Understand and optimize for the company’s key value drivers
- Reduce financial risk to instill buyer confidence
- Prepare for due diligence by organizing financials and legal documents
4. Be Cautious with EBITDA Adjustments
Avoid disputes in the purchase price by ensuring EBITDA adjustments are appropriate and supported by proper documentation. Sell-side due diligence is essential to validate these adjustments and ensure a smooth transaction process. All financials must be defendable.
5. Avoid Preconceived Notions About Buyers
Keep an open mind regarding the “right” buyer for your business. Strategic buyers, independent sponsors, family offices, and private equity firms all have their merits. Going in with the attitude, “I will never sell to a ________” sounds good, but those players may remain useful to a competitive process.
6. Disclose All Relevant Information
In today’s thorough due diligence processes, disclose everything, even details that may seem less significant. Transparency is crucial in building trust with potential buyers. Some of the things you may feel are “not important” could put the deal at risk.
7. Focus on Terms, Not Just Price
When evaluating potential deals, consider:
- Consideration: How owners and shareholders will be paid including any consulting contracts.
- Employees: Consideration for key personnel and how they will be secured
- Earnouts: Common for bridging valuation gaps but not guaranteed
Those are just a few of the elements to consider when selling. If you have questions, reach out to info@criadv.com