“Is my business ready to sell?”
It’s a question we hear often, but it’s one that comes with a bevy of follow-up questions. How do you know it’s the best deal? What should you be doing to be prepared for the deal? What steps can be taken inside the business to make it more attractive for a sale? How do I know that my business is ready for the transaction dance?
On our most popular episode of In Process to date, our hosts Evelyn Ashley and John Monahon caught up with George Shea, Partner and Information Technology Team Leader at Focus Investment Banking, and Denis Brown, Certified Exit Planning Strategist at Pace Capital Advisors, to investigate what company management and owners should be considering—as well as what the answers to amultitude of questions could be.
“What we often see is that when someone is approached by a competitor, or maybe someone that they have a pre-existing relationship with, they immediately think that is one of the best deals that they’re going to get. They find it attractive immediately,” says Monahon, who regularly oversees mergers and acquisitions from the legal standpoint. But the first offer is not typically the best offer possible, and even if it is, this conversation should trigger action outside the deal on the table. It is just the start.
“Why don’t we call two or three other people up and have a party,” says Brown. “See who wants to really take you to the dance.”
“In my experience, the way to get best value for any seller is to go through a competitive process where you have multiple offers and the ability to leverage those offers one against the other,” adds Shea. He says another common mistake involves looking only to competitors as buyers.
“A competitor is not going to pay top value,” he insists. “It’s not a ‘have to have.’ It’s a ‘nice to have.’ The real value comes when you have someone from outside the specific niche that the business is in that sees this as a complimentary fit and a have-to-have. It’s a direct edge onto their core business.”
While a would-be seller can’t always control which parties are interested in buying, the one thing that remains in the seller’s control is the way the business is managed and scaled leading up to the sale.
“A patient seller is going to do better long-term than a seller that turns down some real expansion opportunities that could scale and grow the value of the business,“ says Brown.
Stream the podcast in full in the player below as our hosts and guests analyze the different ways businesses can shape up internally to make them more competitive during a sale. For more from In Process, subscribe to the podcast on iTunes.