When you’re selling, the obvious aim is to maximise the sale price – and the first rule of the game in that quest is that it’s never too early to start planning. Before you even enter the formal M&A process, you can do a few things to position yourself for the most optimal outcome.
1. Bring your A-Team
Having a dedicated team for the formal sale process is necessary; building and engaging the team before anything commences is also advisable. Even before identifying a buyer or negotiating terms, there’s value an adviser can add.
Accountants can assist in structuring the transaction and in getting the business’ financials ready for a prospective buyer to review, and a broker or investment banker can assist in maximising the transaction’s value as well as in the creation of marketing collateral, the solicitation and coordination of multiple bidders, and navigating the due diligence procedure. Your lawyers can guide you through the pre-sale process, offer advice on preliminary agreements like non-disclosure agreements, and work with your accountants to identify the best structure for a transaction.
2. Housekeeping
A proactive corporate clean-up is a great way to ensure everything is prepared from a buyer’s perspective. Address corporate record-keeping gaps. Clean-up work done upfront will streamline the due diligence process and shorten the overall transaction timeline.
3. Be prepared – due diligence
Due diligence is an essential step for any buyer, so anticipating their needs and preparing is an excellent way to drive buyer confidence and increase the value of your sale. Actions such as sorting the company’s records and information by subject matter (e.g., organisational documents, capitalisation, operations, indebtedness, intellectual property (IP), employees/incentives, marketing materials, real estate, material contracts, etc.) to make it easier for a prospective buyer to perform its due diligence. It puts you in a position to respond to due diligence queries and requests. This will also aid in creating an organised due diligence data room.
4.Stay ahead of the game
In most instances, a buyer isn’t initially interested in all the facets of your organisation. They want to understand and connect the key parts representing the business’s most valuable aspects. Having an awareness or anticipating what that is might be difficult, so engaging an adviser is recommended. For instance, if your main asset is intellectual property, consult with IP lawyers to ensure that you have legal control over that IP and all the necessary documentation to reassure a buyer of those rights. Another example would be to work with regulatory advisers if you are in a highly regulated industry to address and anticipate any potential regulatory issues.
5. How will everything work?
M&A deals can be set up in various ways; frequently, however, decisions are based on tax implications. So that you are ready for discussions about structure with potential buyers, get in touch with your tax advisers to discuss the potential tax issues associated with your exit that might erode your sale price and how to maximise what you get to take away after the deal is done.
6. You’ve been approved.
For an exit, any number of approvals could be required – you may need permission from the board, shareholders, landlord, important clients or suppliers. A plan for how you will seek and ultimately obtain any required approvals should be in place. Try to predict any approvals that may be necessary to mitigate delays or, worse, prevent you from closing the transaction.
Takeaways
Like the formal M&A process, preparing for a sale involves many moving parts. It’s a complex undertaking, but if you thoroughly and thoughtfully plan, speak with the experts and go the extra mile, the payoff is worth the time and effort.