Before Going to Market
By this point, you and your client have spent a considerable amount of time making the business as attractive as possible to potential buyers. Things are going well, but there is plenty of room for growth and higher profits. As you approach the date your client plans to put the business on the market, you should help her do the following:
Is it a good time to sell? After building value in the business, it is likely in a good position—able to demonstrate a track record of growing revenue and profitability to buyers. However, there may be external factors such as a poor economy or a slow down in the industry that affect the timing.
If business is going well, your client may decide to delay the sale for a year or two to reap the benefits of improved earnings and create an even more valuable purchase for buyers.
Define The Objectives For The Sale
Before talking to an M&A advisor, your client should think about the objectives for the sale—all the things that are important to her. Quite often, there are factors that are more important than financial consideration.Questions to ask your client include:
- How much cash do you need out of the deal?
- How long do you want to stay with the business to help manage the transition, and in what capacity?
- Do you want the new owner to be hands-on or to let the business continue running as it is?
- How much attention do you want to place on the buyer’s treatment of your employees?
Choose An M&A Advisor
Now is the optimal time to choose an M&A advisor, as he or she can assess the business and advise whether to go to market now.
Choosing the right advisor can be a challenge. Your client should do her due diligence as this is someone she will work closely with for a long time. Factors to consider include the advisor’s experience, personality, and success rate as well as what his or her past clients have to say.
As an advisor, you may have experience with various firms and be able to recommend someone you feel will give the most professional service. You can also encourage your client to speak to other advisors on her team to get their recommendations.
Things To Look For In An M&A Advisor
Here is a checklist you can share with your client to help in this search. A good advisor will have the following:
- Well-defined processes for ensuring confidentiality
- A well-defined communication process so that the client always knows exactly what is going on throughout the sale process
- The willingness to tell the truth, even if it is bad news
- Respect for clients’ time
- A commitment to act in the client’s best interests, even if that has a negative impact on the advisor
- An excellent track record of successful deals
- The willingness to invest capital in the materials used to market businesses
- For large transactions, the ability to bring in best-in-class sector expertise
- The willingness to invest just as much and work just as hard for every client, regardless of the size of the deal
- The willingness to include other advisors in meetings
A final note: The M&A advisor’s job is to sell the business at a fair price on fair terms. Fair price means market value and the only way to know if offers represent market value is to get more than one letter of intent. Your client’s chosen M&A advisor should be focused on generating multiple offers.