In an uncertain business environment, more business owners will be considering an exit. Colm Sheehan shares five tips to successfully manage the sale of your business.
Selling a business is time-consuming and, for many, it can be an emotional endeavour. The process can be lengthy and stressful, as you need to be in control of each stage of the sale from start to finish to ensure you maximise your return.
Here are five tips to support a successful sale:
1. Find the right advisors
To achieve a successful sale, you need to prepare for your exit. There are complex legal, financial and tax implications that need to be considered and planned for. It is paramount that you find the right professional advisors, who understand your requirements and strategic goals and can guide you through the steps involved.
Buyers want as much transparency as possible and will typically perform detailed due diligence. Spending time evaluating and presenting your company’s financial and business history and future projections is crucial. As a seller, you can avoid red flags by working with your advisor to ensure that everything is in order and that the right information is provided at the appropriate time, to facilitate a smooth process.
2. Maintain momentum
The importance of maintaining momentum cannot be underestimated. To successfully conclude a transaction, you must have the resources required to move efficiently through each stage of the transaction. It is vital to pre-empt buyer concerns and to respond to their queries promptly. This will help to ensure you are on the front-foot and in control of the process. Spend time before going to market refining and preparing for the process ahead.
3. Create competitive tension
By creating a competitive environment for the sale of your business, you could help to drive up price, achieve better terms and a faster transaction.
You can create competitive tension through a carefully managed and well-executed sale process which attracts more than one potential acquirer. Even if you are dealing with one party, you can maintain a strong negotiating position by being clear that, if they don’t put their best offer forward, they won’t get the deal.
4. Protect your business
To sell your business, you may need to provide sensitive data to interested parties regarding revenue analysis, key contracts, employees and operating structures. In most cases, the interested parties will include some of your competitors who are eager to expand their own business. Include how?
To protect the inherent value in your business, ensure that information is shared only with qualified parties who have signed a non-disclosure agreement. You should withhold commercially sensitive data until late in the sales process when it is more probable that the transaction will complete.
5. Compare offers
When selecting a preferred buyer, price will be a key criterion. It is important that you critically compare all aspects of competing offers to ensure that they are assessed on a like-for-like basis, however.
Offers may contain earn-out provisions and contingent consideration. Equally, there can be working capital or cash- or debt-free adjustments. How robust is the buyer and how are they going to finance the acquisition? These are all relevant factors when weighing up competing offers.
Given the stakes, it is vital that you are clear on the specific terms of each offer and that you have all the necessary support and expertise to enable you to make a clear and objective decision.
Colm Sheehan is Director of Corporate Finance at Crowe