Thinking about selling your company?

Sooner or later all business owners and entrepreneurs must address the issue of selling their company. To a neutral third party, this sounds like a relatively mundane subject, but for owners who have invested all or most of their adult lives in their companies, it is a highly charged and emotional issue

Having worked with many founders and owners of companies, I have often noticed that owners’ thinking about the process is often poorly developed.

In the absence of an overall, clearly defined game plan, they have a tendency to make ad-hoc decisions and improvise as they go along. Quite often, this turns out to be expensive and disappointing.

Over the next three weeks, I will offer eleven suggestions that owners thinking of selling their companies should consider as they get ready for what, in many cases, may very well be the largest and most important transaction in their life.

1. Sell your company when its outlook is strong

The best time to sell your company is when its prospects are good. A buyer will pay more for a company that is well positioned for future earnings growth.

2. Prepare ahead for the sale of your company

Timing is of the essence. Keep an eye on market dynamics. If you expect your industry to go through a wave of consolidation, timing your sale with the upswing of such a cycle may help you improve your net yield[1] from the sale by a significant amount

Solicit advice from your M&A specialist early on in the process. An experienced advisor will assist you in evaluating all of your strategic alternatives and in determining whether selling is actually the best decision.

In addition, if brought into the process early, an M&A advisor will help you position your company and its financial performance in the best possible light, keep you apprised of market and industry conditions, and gain a thorough historical perspective of your business so that your company can be best represented during the marketing process.

3 Develop and maintain a strong management team

Most buyers want to know that there will be an ongoing management team able to successfully run the business after a sale. Consider putting incentives in place to make sure that the management team remains intact beyond a sale process.

4. Continue to build the company for the long run

Avoid inflating short-term earnings at the expense of long-term growth. Buyers are sophisticated and will discover any earnings management during due diligence. The long-term prospects are critical to a buyer.




Thomas Schinkel is a certified M&A advisor, who works with founders and owners of mid-market companies on several specific issues of strategic significance to them and their families. Thomas.schinkel@thomasschinkel.com

 


[1] net yield is the amount a seller receives after deducting all taxes owed and after deducting all legal, due diligence and other fees typically associated with the sale of a company.

Source: www.opi.net, OPI Blogs

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