PREPARING A BUSINESS FOR SALE – WHAT’S INVOLVED?
Selling a business will probably be the biggest transaction of your life, so make it count. Ensure that you take as much care and attention over the exit as you have in building your business.
Preparatory work takes time but will help:
- Enhance value
- Reduce risk of a deal failing
- Reduce stress!
PREPARING A BUSINESS FOR SALE!
A good M&A advisor will be able to advise you on the key value drivers for your particular industry. For example, we prepare bespoke industry-specific reports that look at market value (e.g. total available market, growth segments, forecasts), current Enterprise Value / EBITDA valuations for both public and private companies together with typical buyer profiles and their geographic / strategic interest. Taking your own specific interests into account, our research identifies whether the optimum exit would be delivered with a strategic (‘trade’) buyer or through a financial investor / sponsor.
This market overview can be overlaid with your current business performance to see where it fits in terms of potential value. Once you understand the key drivers of potential valuation, then you can focus the business on the key metrics as you build towards any exit.
An effective M&A advisor should complete a detailed review and will be able to show you with strategic modelling how certain structural and operational changes could affect value. Beneficial changes like these generally need time to implement and reflect in the balance sheet.
REDUCE THE RISK
Buyer due-diligence can be exhaustive. And exhausting!
If a buyer is to spend £’Millions, they will inspect the business in minute detail. Legal, tax and financial questions can run literally into their thousands.
Running a dummy due-diligence prior to taking the company to market can sound like a waste of time. But if the effort is focused in specific areas that are the most likely pitfalls, then this is money well spent. Deals fall for all sorts of reasons in the due-diligence phase – issues can be uncovered that not even you may be aware of.
Dummy due-diligence can focus in key areas such as legal structure and title, intellectual property, commercial contracts & disputes, tax and financial systems. Corrective actions can be implemented out of the real-time due-diligence spotlight. Data can be uploaded into a virtual data room in advance of the real due-diligence, hence avoiding duplication of effort (& cost) downstream.
Running a simulated due diligence reduces, significantly, the potential downside of an aborted sale. It reduces the risk of price-chipping and onerous warranties and indemnities. Yes it involves cost and time – but this is usually a one-time investment that offers more upside than down for the savvy business owner.
REDUCE THE STRESS!
Once ‘heads’ are agreed, the due-diligence process can feel intense, invasive and can completely overwhelm your daily schedule for sometimes months.
Whilst you may have the support of your management team, the simple fact is that as a business owner, come due-diligence time, you will be heavily involved.
For those who have run a dummy due-diligence in advance of the real exit, the process is considerably less stressful.
Your choice of M&A firm to support you can mitigate stress hugely. A boutique experience such as ours is designed to take the strain.
Optimising the finances (e.g. balance sheet), organisation (e.g. management team, structure) and business performance (e.g. adjusted income statement, relevant KPI’s) takes time. As does running through a simulated due-diligence and correcting issues prior to exit.
If you have sufficient time to prepare, allow at least 6 – 12 months upstream of the exit process to get ready. And remember that a well-executed strategic exit will take a further 9 – 12 months at least.
Our Exit Masterclass© is designed as a bespoke appraisal of your unique business and its potential viability and value in the current market. It is never too early to start, if you are considering a company sale in the next 5 years get informed, contact us to find out more or book your confidential appraisal.Tags: business sale, due-diligence, EBITDA, key value driver, preparation, strategic buyer