Selling a business is never an easy task, especially for the entrepreneur. There are so many things to consider in the process, not to mention all of the ancillary psychological pieces that play a very influential role in determining the who, what, when, where, why and how of getting a deal done. For those that are familiar with the ins and outs of selling a business through mergers and acquisitions, there are a number of key considerations when looking into getting a deal done. We have outlined a few of them here.
Going After Strategic Buyers
There is a big difference in the types of buyers that may have interest in acquiring your business. Financial buyers include those in the realms of private equity groups and family offices. These groups are typically just looking for the best deal they can find. That is, they want to find a business they can purchase for cheap, grow it and sell it for a massive return in three to five years. On the other hand, there are strategic buyers. This group typical work in the industry, have a reason to be connected to the business in question and are directly involved in the day to day operations of a similar company. They also can see through the tea leaves and have an idea of the company synergies that can be readily extracted from a horizontal or vertical acquisition in the same sector.
While it is important to have both groups at the bargaining table. The latter is more important than the former as they are not only willing to pay a bit more, they typically have better ideas on how to grow the business to the next level. For the owner that maintains an equity hold in the company after it is sold, this could mean a second bite of the apple later on in the process.
Get the Financial House in Order
Sellers are often not prepared to sell when the time and opportunity hits. That time is often dictated by personal issues or by the ebbs and flows of macroeconomic shifts. The right buyer and right price requires that all the financial house of the business is in perfect order. That means the income statement, balance sheet and statement of cash flows are clean and tight. It also means that the company’s finances are typically audited by a CPA. While not required, this is extremely helpful in ensuring the buyer had complete confidence in the deal.
Getting a deal done is hard enough as it is, but getting a good deal done requires both foresight and tenacity—something that not all investment bankers or middle market mergers and acquisitions advisory firms have.