Whether driven by corporate tax benefits or upcoming retirement plans, selling your business takes preparation and strategy. Owners who jump into the process ill-prepared risk missed opportunities with ideal buyers, last-minute price adjustment requests, and other negative impacts. To increase your chances of a successful M&A transaction and to maximize the value of the sale, consider these essential steps for preparing to put your business on the market.
Get Your Books in Order
It’s easy to get caught up in doing what you do best – running your business, creating sales strategies, and developing new products or services. Many executives tend to focus solely on accounts receivable, accounts payable, and payroll when they dip their toes into the company’s financial matters. However, when you’re considering selling the business, it’s important to look at your financials from the point of view of potential buyers. Private equity firms and other types of buyers are interested in the numbers, and many will invest in a Quality of Earnings report to test your financials. If they find a discrepancy in your numbers, you may be left with the choice of making concessions that aren’t in your best interests or sacrificing the deal all together.
Getting your books in order and making sure they are GAAP-Compliant is the best way to avoid unexpected surprises during negotiations.
Check Into all Legal Matters
Similar to the financial matters of a company, unexpected legal concerns can derail the sale process. Prior to engaging a potential buyer, work with experience M&A attorneys to address each of these areas:
- Ownership Structure
- Incorporation Documents
- Operating Agreements
- Partnership & Shareholder Agreements
- Board Meeting Minutes
- City & State Licenses
- Certificates of Good Standing (from states in which you operate)
- Customer & Supplier Agreements
- Compliance with Relevant Regulations and Employment Laws
Create a Clear Value Message
You know that your company is highly valuable and trust where the company is headed, but potential buyers need more than your word. By supporting your claims with tangible facts and quantifiable data, you can articulate value in a pragmatic and credible way. What makes your company highly competitive and how has that impacted your numbers? What is the value of your intellectual property or patents? In whatways does your data show growth and profitability?
Your value message should lead the preparation of all materials being sent to potential buyers. Engage an M&A advisor to help you market your business and compile supporting materials, including your value message, confidential information memorandum, and financials overview.
Explore the Big Picture
Many business owners approach a sale due to assumed tax benefits or because they haven’t fully explored options for succession planning. Before engaging a potential buyer, it’s essential to get expert tax, wealth management, and business consulting advice. This advice may alter how you structure your deal or change your opinion on whether selling is your best option.
With over 35 years of experience, Hall & Company’s team of expert Accounting, Business, and M&A Consultants have guided countless companies through the process of buying or selling a business. Contact us via email or call our offices at: 949-910-HALL (4255).