Preparing Your Business for a Successful M&A Sale Process

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For many business owners, selling a company can be a lifelong dream that rewards them for their hard work and sacrifice. And while the courting period and result can be extremely appealing, getting to a closing requires going through a detailed process that involves time, resources and expense. To navigate the intricacies of the sale and enhance the likelihood of achieving a desired outcome, it is crucial to prepare well in advance. Here is a list of important items that owners should consider when evaluating their readiness for a sale.

Getting Your ‘House’ in Order

Before initiating the process of talking with prospective buyers, make sure your company’s financial statements and business information are updated and easily accessible. Potential acquirers will thoroughly scrutinize your business, including your financial performance, technology and operational systems, staff, clients, regulatory compliance systems and other company information.  Having multiple years’ worth of financials along with the ability to show key financial and operational metrics that are important to your business and industry would be ideal, along with a current organizational chart for your business and a breakdown of staff by position/function. The more you can show your company’s performance and where that performance comes from (clients, services, products, etc.), the better a buyer will respond to this information. Additionally, if you have any major operational and/or legal concerns, you will want to address them in advance of any discussions with buyers. Updating your company information and resolving business issues will enable you to move more quickly through the sale process.

Identifying Your Sales Team 

Owners often underestimate the demands of a sale process. While you likely have adequate resources in place to manage the day-to-day operations, usually owners must rely on the same resources to help them support the sale of the business. Therefore, it is important to identify in advance who will be leveraged internally and externally to participate in an M&A deal process, and when these folks will be included in the process. Initially (pre-offer), owners usually want to minimize the number of folks internally who become aware of a potential deal, so they will rely on external accountants, consultants and legal advisors to support their needs. Identifying your team and making sure they are ready to go when needed will be critical to a successful outcome.

Enhancing Reporting Capabilities 

When potential acquirers are considering an acquisition opportunity, they inevitably request detailed information about a business’s income, profitability, and operational performance. These data requests often inquire about revenue distribution across clients, service lines, and jurisdictions, as well as the employee census or overview of key metrics. Having readily available, detailed information can influence how acquirers assess market value and determine the structure of an offer. Building strong internal reporting capabilities that can swiftly and accurately provide answers to these key performance indicator requests will streamline the due diligence process and demonstrate to potential acquirers that the business maintains meticulous operational oversight and readiness.  

Developing Forecasted Financials and Budgets 

Buyers will assess both past financial performance and what an owner expects in the near future. Developing a realistic forecast and showing how well the company has performed versus the forecast can help provide a buyer with greater confidence when determining their offer. It can also help a buyer determine how the company will perform under their ownership at least for the immediate period post-closing. Buyers who rely on debt financing for their transactions will be particularly interested in realistic forecasts. 

Showcasing a Detailed Prospect Pipeline 

Integral to solid financial projections is a transparent and well-presented prospect pipeline that substantiates the expected operational performance. Acquirers prefer businesses actively pursuing new opportunities rather than solely maintaining existing client relationships. A detailed report outlining the number of opportunities, their current stage, estimated value, and brief commentary demonstrates the credibility of projected future growth. It also illustrates how potential buyers can capitalize on these opportunities post-acquisition. Metrics such as conversion rates and sources of opportunities further underscore the robustness of your pipeline, providing additional assurance to prospective buyers. 

Every M&A transaction is unique, each with its own complexities, but proactive planning and preparation can significantly mitigate potential risks when the opportunity for exit arises. Whether you are currently considering selling your business or not, starting the preparation process early increases the probability of a successful outcome. Corporate Advisory Solutions specializes in guiding businesses through this process. Explore our Exit Preparation Services page to learn how Corporate Advisory Solutions can help you prepare for a successful M&A transaction, maximizing value and securing your future. Engage with us today to leverage our expertise and ensure you are ready to meet the market’s demands.

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