What should you consider prior placing your business for sale with an agent?
The sale of your business asset is one of the most important decisions that you will make. Choosing the right representative to sell your business, can make the difference to a smooth transaction or a painful and costly experience.
Careful planning of our your exit position and timing to ensure that the business has time to work on all competencies, so that the revenue and profit has increased the opportunity to greater influence the purchase price. A good strategy is to start preparing at least two years ahead of placing the business on the market. Having an experience M & A advisor during this period will assist in steering you in the right direction.
Before you decide to sell the business, it’s imperative that you have your financials in order and up to date and an information memorandum prepared. Templates are available on the internet or it can be prepared by your agent. The document needs to be clear, concise and to the point.
Once a prospective purchaser peruses the IM and there is a strong level of interest, the document will be passed onto his or her accountant, financiers and legal advisors. The information will need to written in a format within the context of your audience. A purchaser may become emotionally attached to the business but you can be sure that his or her team of advisors will keep things in check. Any offers will be based on the facts, not feelings. The more concise your information is, the quicker the decision.
Your solicitor and accountant will be actively involved in the transaction and will be required to assist in answering complex questions from the buyers side. It’s important that you instruct them to be co-operative and proactive in assisting you to obtain a positive result.
We generally advise any prospective sellers that they should operate their businesses as if at any moment, a prospect may knock on your door for an acquisition and the management structures should be in place to ensure a smooth transition.
Dependant on your industry, prospective buyers will typically examine the history of the business, future sustainability and growth.
Whether you decide to place the business for sale on the market with a price or as an expression of interest, it’s important that you price the business right. Going to the market with inflated expectations will only create disappointment. To work out the value, it would be wise to obtain an independent market appraisal from at least three Mergers & Acquisitions houses on the current market value and strategies on how to structure the sale to gain maximum value.
Prior to listing the businesses for sale with a facilitator, request references on his or her experience in working closely with buyers and sellers transactions of your size business.
Additionally, it’s equally important to obtain references from other professional advisors including accountants, solicitors, stockbrokers, private equity specialists, tax specialists that have previously dealt with your facilitator. Each party works from their own perspective and your facilitator will require the skills and experience work with each party from both sides of the transaction and keep the harmony alive. This can entail complex negotiations and problem solving with a realistic and solution-focussed mindset.
By implementing key strategies, your facilitator should be in a position to assist you in maximizing your business’ value, by structuring a tailored marketing campaign to suit your market position and to the right audience. This improves your chances of dealing several potential purchasers, rather than being forced into negotiations with only one prospect. It’s important that your facilitator deals only with pre qualified prospects, upon their signature of a confidentiality agreement and your approval prior to releasing your business details.
It may be an idea to be a “secret shopper” and contact the facilitator’s office to enquire about a listed business. This will give you and indication of how the facilitator qualifies prospective buyers and protects a business’s confidentiality.
At a listing meeting, most facilitators will discuss their past successes. It’s equally important to ask them about some of their failures and how deals collapsed. This could give you a good insight into the integrity of your facilitator and also give you a guide on what not to do when selling your business.
The most important key to engaging a facilitator is the level of trust. From the facilitators’ perspective, most want to feel they are marketing a business with proven financials, owner transparency and within a realistic price range. Equally, a business owner wants to know that he or she is not wasting time with unqualified buyers, an unmotivated facilitator and very little communication. Establishing trust on both sides will give both parties a level of comfort that they are in safe hands.
You should demand consistent communication and market feedback. Even if the news from the market may not be so good, it’s important that you and your facilitator have a transparent relationship to work through any challenges and move towards a positive commercial outcome.
The key reasons that a business does not sell are price, contract terms & conditions and poor communication between the parties.
An experienced facilitator will be able to guide you through each of the processes of selling your business and advise you of any potential pitfalls before they happen.
Depending on your industry, most buyers fall into one of the following categories:
• Public companies
• Private companies
• Private investors
• Former CEO’s
• Business migrants
• Private equity firms
• Seasoned operators
The right facilitator should have established networks in each of the above categories and able to quickly draw on resources to ensure that your business is being offered to the right audience.