Many sellers and buyers assume they know how to manage and handle all aspects of a business sale, merger or acquisition. Inevitably, they make mistakes that significantly impact the final outcome. Frequently, they do not even know they have left “money on the table,” however, some time after closing, they will discover that their assumptions and actions irrevocably compromised what should have been a better result. Those who seek to sell or buy without the advantage of value-added expertise, are often unprepared for the complexities of the process and are prone to committing serious errors.
Vigilant and diligent preparation must address these issues:
- Value enhancement – analyze numerous issues, i.e.,not just financial statements
- Selling at the right time – timing is key to maximize interest, as well as ultimate terms, structure and proceeds
- Selecting the right buyers – people or entities the seller knows or conducts business with are often not the right or best buyers
- Understanding buyer motivations – motives, priorities, financial capability, growth strategies, synergistic benefits and corporate expansion initiatives
- Complete, comprehensible documentation – well-prepared, accurate documentation is a must
- One buyer – too often, a seller tells us that they have one interested buyer. One buyer limits selling leverage and frequently compromises results
- Focusing on the future – present the past, but sell the future and the potential likelihood of future earnings and growth
- Breaking gridlock – unlike attorneys, we can address and communicate with all parties during every stage of the process including: grievances; floating different proposals; clarifying real intentions; and breaking “transaction gridlock”
- Valuation multiples are misleading – frequently “so-called” industry multiples are irrelevant unless you evaluate all the issues that contribute to value and impact price, terms and conditions
- Cash and structure – structure and terms can sometimes be more valuable than an all cash price
- Consideration – the acceptance of thinly traded stock or stock of a weak company can be a costly mistake
- Impropriety perception – an objective internal review to identify potential problems, challenges or improprieties is critical to a successful closing
- Truth and material issues – telling half-truths or not disclosing material issues is a big mistake
Whether you’re selling or buying, if you are well prepared and well represented, you will be positioned to optimize transaction results and minimize risk.