If you are considering selling your business in the next few years, you may want to take a few minutes to read through some of the most common challenges and decisions you are likely to face.
1) Leave or Stay
Let's put it another way: Sell 100% or Recapitalize your Company by Selling a Minority or Majority Stake.
You need to consider whether you want to leave the company entirely or whether you want to remain for some time after the sale. And if you leave, how quickly do you want to transition out of the business: 3 months or 3 years?
If you stay to work for someone else and retain a minority stake, you may see your company change direction and the new owners may make decisions you don't agree with.
On the plus side, if you stay and retain a minority stake, there is a strong chance that you can sell the company for a higher price than selling 100% today. Buyers reward your confidence and pay a higher price, because among other things, they have less risk. You also get to enjoy seeing your company grow and then earn a significant second pay day in a few years.
But, you have to ask yourself if you can handle someone else steering your ship in the meantime. Consider how their decisions could put your remaining investment at risk?
2) Protecting Your Employees
Over the years, your employees have relied upon you to do the right thing and consider not only their lives, but also the lives of their families who also depend on you.
Many of your employees have become part of your business family and you want to treat them with the care and respect they deserve. You want to reward them for their loyalty and hard work.
In some cases, you may be able to negotiate employee protection clauses that will calm your employees' fears during the transition. At a minimum, you can make sure that you not only get a great price when it's time to sell, but that the new owners are going to do the right thing for the future of your Company and all those who have a stake in its success.
3) Letting Others Take a Look at Your Books
In many cases, this could be the first time you have opened up your books to anyone who is not in your inner circle. When you sell your company, you have to go beyond your attorneys, accountants, managers and financial advisors. If you want to get the best deal, you are going to need to open up your books to a number of prospective buyers.
Not only are they going to look deep into your financials to determine and validate their purchase offer price. They also need to gain a deeper insight into the way you have run your company, look at how you have made your decisions and how those decisions may affect the future, as well as determine the financial strength and stability of your company.
Before anyone looks at your books, however, you need to have an independent expert go through them thoroughly to identify any issues or problems that a buyer may be concerned with.
There is often plenty of time to resolve the problems before anyone sees your financials. It also makes sense to better organize your financial information and make some adjustments for non-recurring and discretionary expenditures, which may distort the true cash generation capability of your company to a new owner.
4) Determining a Fair Price for Your Business
It makes sense before you get too far down the road to get a reasonable indication of what your company could sell for. You should probably hire an independent firm to appraise and value your business.
Not only will give this you a better idea of what to expect, but it will also help in planning for your future. The valuation will be contingent on the terms that you insist upon in the sale, as well as prevailing industry and market conditions, but a valuation expert should be able to make adjustments and produce a range of valuations for those variables.
5) Structuring the Sale
How will the purchase price be paid to you: in cash, stock, earn out, warrants, options, or a combination of all? Deciding on the right deal for you has advantages and disadvantages that an expert should help you understand in advance. An expert can also explain how your decisions could affect your net proceeds from the sale.
Anything is possible and you will be in control of all negotiations. It is a good idea, however, to have a clear plan of your ideal exit before you start the sale process.
6) Maximizing Sale Price
There are many books and thousands of pages written on all the steps you should go through to maximize the sale price of your Company. A common theme throughout is to start early, prepare very thoroughly before going to market and keep your cards close to your chest. You should only discuss progress, updates and strategy with your advisors in the sale. You have a valuable and unique asset in high demand. Hard work and the right sale strategy will deliver a higher and broader range of purchase offers for you to choose from.
7) Choosing the Right Team to Represent You
You are the expert at running your business. No one has more experience and nobody is better informed. You have been through the highs and lows of multiple business cycles and you understand the challenges of your business better than anyone.
So, it makes sense that when it comes time to sell your business to look for the same qualities in a firm to represent you in the sale. You need to find a team who has experience in your industry, who is well informed with extensive buyer relationships and who will work hardest to bring you the best deal possible. Let them do their job.
Experience in marketing your Company and structuring a sale is critical to bringing you the highest price. An Merger and Acquisition intermediary will also work closely with your legal and tax experts to minimize your liabilities post-acquisition and maximize the after-tax proceeds to you and your family.
When it comes time to engage a firm, you need to do your homework. Interview all the team members who will be working on your project, check references and view examples of their previous work. As a final check, you should also call their former clients to see how they performed in the past.
All rights reserved. Copyright: ClearRidge Capital, LLC, 2009.
ClearRidge provides Restructuring, Corporate Finance, Merger and Acquisition and Turnaround services for midsize companies.
Restructuring includes financial, operational, strategic and pre-Sale restructuring.
Corporate Finance includes advisory for raising and replacing senior, subordinated or mezzanine debt, as well as raising and replacing equity to provide the lowest cost of capital.
Mergers and Aquisitions includes buying, selling, merging and valuing midsize companies.
Turnaround, Bankruptcy and Crisis Management services include debtor and creditor advisory, bankruptcy support and turnaround management.
ClearRidge provides Top Tier advice and relationships with Middle America values and work ethic.
We have directly owned, operated and managed midsize companies. We know the business from your perspective.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment