By Neal England
Practice Leader – Human Capital Management
There are many reasons to consider selling your business. The company may require substantial capital investments to upgrade technology and infrastructure or add key sales or executive staff. Maybe the owners are nearing retirement, seeking a lifestyle change or dealing with health issues. Sometimes client growth demands can cause significant stress on a business to expand or merge in order to realize its full potential. Or maybe market conditions have become favorable and it’s time to capitalize on the market opportunities. Whatever the reason, here are a few things to consider when preparing for a sale:
- Timing: Internal and external factors can affect the value of your company. A properly timed sale can help you achieve maximum valuation. Are you operating in an industry that is on the rise or the fall? Likewise, is the company’s financial performance on a growth trajectory or in decline? Is the broader economy strong or under stress?
- Develop a Plan: Make sure key management is aligned and in agreement about the company’s future. You’ll want to minimize disruptions to the business’s operations while managing confidentiality during a go-to-market sale process. The plan should include hiring expert advisers, identifying resources, targeting prospective buyers and communicating with key personnel.
- Resolve Issues: Are there balance sheet matters that need to be adjusted, eliminated or supported? Do any taxes or legal issues need to be identified? Are the operating processes robust and is the sales team knowledgeable and clear on goals? Is technology up-to-date? These are just a sampling of issues that may need to be resolved prior to a sale.
Once you’ve prepped for the sale, follow these steps to execute:
- Market the Business: An experienced M&A adviser will handle this step by effectively targeting prospective buyers and providing them with a summary and detailed company briefing about the buying opportunity in a highly confidential manner.
- Qualify Prospective Buyers: A good adviser insulates you while conducting due diligence on prospective buyers to determine their financial capability to perform, strategic and philosophical fit, and ultimately bring the most qualified buyers to management for consideration.
- Conduct Due Diligence: Once the best valuation has been negotiated with the best philosophy-matching buyer candidate, each side will conduct a thorough due diligence to determine whether to move forward with the sale.
- Close the Deal: There will be multiple steps along the way to reach this point, including letters of interest, letters of intent (LOI), engagement of legal and tax professionals, followed by an in-depth purchase agreement and other legal documents.
There’s no substitute for preparation when it comes to improving the ultimate outcome for a business owner selling their company. Want to learn more? Email me at firstname.lastname@example.org to set up a time to briefly discuss strategies or receive a complimentary PowerPoint presentation on selling your business.
Capital Alliance Corporation is a Dallas-based investment banking firm with an extensive international reach and a 40-year history of providing trustworthy advice to private company shareholders who want to sell their businesses. Our team has deep operational and M&A experience across broad human capital management (HCM) and technology sectors.