For most business owners, the decision to sell their company is a pivotal moment in their professional journey. Yet, embarking on this path for the first time can be daunting. The intricacies of selling a business often involve a complex dance, and missteps can be costly. Drawing from his own experiences of both selling and buying businesses, Robert Glazer offers six crucial pieces of advice for prospective sellers who aspire to secure the best possible deal with the right buyer.
Navigating the process of selling a business without expert assistance is akin to attempting Mount Everest without an experienced guide. Seek the support of professionals such as accountants, lawyers, and transaction advisers who specialize in the mergers and acquisitions (M&A) process. Investment bankers are ideal for larger deals, while M&A brokers or advisers are suitable for smaller transactions. Attempting a DIY approach often results in no sale or a protracted timeline with a less favorable price. Buyers can seize an advantage if your deal process loses momentum. Maintaining a competitive process with specific deadlines is essential. Experts help by creating this competition, ensuring buyers remain engaged. They also protect sellers from buyers trying to coerce them into early agreements, only to renegotiate later. Don’t assume that your current lawyers, accountants, or advisers are suitable for the M&A process. Select a team of experts who specialize in M&A transactions. Approach this decision as a critical hiring process.
Objectively evaluate your business’s value by comparing it to similar companies in your industry. Recognize that potential buyers, often larger and more established firms or private equity groups, assess your business through a specific lens. Factors such as industry, profit level, growth rate, and business model play crucial roles in valuation. Presenting accurate and organized financials is vital. Buyers want financials that adhere to generally accepted accounting principles (GAAP) and adjusted EBIT, which offers a more precise financial picture. Be mindful of both “add backs” and “subtractions” in your financial presentation, as they can significantly impact the final deal value. Thoroughly research potential buyers to assess their history of deal closures, seriousness, and compatibility. Get to know their leadership team and culture. Understand your future role if you stay with the company or have earnings tied to its performance.
The selling process, coupled with running your business simultaneously, can be mentally and physically exhausting. Due diligence is an arduous phase, requiring meticulous attention to detail and a significant time commitment. Surround yourself with a capable team to maintain business performance throughout this challenging period. In summary, selling a business is a complex undertaking that requires meticulous planning, expert guidance, and a comprehensive understanding of the market. With the right team, expectations, and data, you can increase your chances of achieving a successful sale and embarking on a well-deserved vacation.
