Selling a business requires a team of advisors who have the right skill set and who can strip away the emotion and individual biases from the equation. Too often entrepreneurs let things get personal or get highly emotional when someone tells them that “their kids are ugly”. This can cause serious errors in judgment in either pushing back too hard or taking a knee-jerk reaction. Having an independent M & A advisor on your team that can look at the situation from an objective perspective can be critical.
Engage your advisors early in the process and create a plan rather than being reactive to incoming inquiries. Selling a business is a systematic process designed to create a competitive bidding process that will generally yield the highest valuation. The best deals for sellers usually occur when there are multiple potential bidders (and the bidders know that it is a competitive process) where the seller can leverage the competitive situation to get a better price. Larger companies often have internal corporate development departments that work only on M & A transactions but small to mid-sized companies don’t have that luxury. Utilizing your own staff as “deal-makers” may save you some money in fees but ultimately may come at a cost of realizing a lower sale price or distracting the business at a critical time. Although selling your business may be the single largest business transaction you do in your life, you can’t take your eye off the ball and let your business slip. The last thing you want to do is to have your sales, pipeline, or profitability numbers slipping significantly in the middle of a deal as this will raise enormous red flags.
The “team” of advisors that are generally required at some point in a transaction include:
Make sure your law firm has someone who specializes in M & A work and isn’t just a generalist as M & A work is highly specialized.
Accounting firms will be required to audit or review your financial statements and interact with the buyer’s accountants. Ideally a mid to large size firm would be best as they will also have tax specialists as well as international expertise which will come in handy if you are being acquired by a U.S. firm.
M & A Advisor
Find an investment bank or M & A advisory firm that specializes in companies of your size and also has direct experience in doing transactions in your industry. An M & A advisor is hired to manage the entire process and will help to negotiate the final deal and make sure it gets over the finish line.
Wealth Management Advisor
Talk to your wealth management advisor early as you don’t want to start tax planning or investment portfolio strategy after you get your bucket of money.