When it comes to the M&A Process, sellers often times have many questions. Here is a list of 7 frequently asked questions about the M&A process.
- When is a good time to sell my business?
The best time to sell your business is now. There is no time like the present. We currently know the political climate, the performance of the business, the appetite of the M&A market, the regulatory conditions, and the tax environment. Taking advantage of the favorable market conditions now will set you up for a successful future. A partial sale can help a young business owner grow at a much faster rate, and older business owners can begin preparing for retirement in advance. So, even if you think you aren’t ready now, it’s still a good time to begin exploring your options. This will provide you with the most flexibility to optimize the best value for your business.
- How do I find out the value of my business?
There are many ways to value a business, but the best way to realize the true value of a business is to test its value in the open market. If you have 40 valuation experts review your business, you will receive 40 different valuations. While we can discuss a range of potential multiples one might expect within the open market, the only person who can provide you the true value of your business is the potential buyer. Thus, going to market is the best way to value your business.
- What can I do to ensure the top value for my business?
Buyers are seeking businesses that help them achieve their growth goals. This might include revenue diversification, new geographic reaches, sticky customers, intellectual property, or a strong talent base. Every buyer will be interested in your business for a different reason, that’s why it is key to make sure that your M&A advisor is advertising your business to the market properly. Also, the more buyer demand there is for your business will help drive up the value. If you have seen the show Shark Tank, you have probably seen that when one shark shows interest in an opportunity, others follow suit and then a bidding war begins. The business that is being presented is the one that often wins in this scenario.
- What type of M&A team do I need?
When it’s time to sell your business, you want an experienced sell-side mergers and acquisitions team. You need a team of M&A professionals that can walk you through the process from start to finish. A sell-side M&A team works for you, not the buyer, so you can be sure you are getting the best value for your business. Seasoned M&A experts know how to tackle any obstacle that slows the process.You will want to ensure that your team includes an M&A attorney, an experienced tax advisor, and a trusted M&A firm. If you have a complex deal, then additional specialists, such as a tax attorney, might also be needed.
- How long will it take to sell my business?
While we wish that there was a straight-forward answer to this question; unfortunately, the timeline can vary greatly depending on the market response and the seller’s motivation. Typically, it will take 2-3 months to prepare the marketing material for selling the business. Once the marketing material is completed, then the marketing process begins. The buyer could be uncovered immediately, or it might take some time for an interested party to surface. Once a letter of intent is signed, the due diligence and contract process tends to take 60-120 days.
- How do I ensure that my employees are taken care of during the acquisition? There are many ways to take care of your employees. The number-one way to ensure that your employees are taken care of during the acquisition is to find a buyer that is a good cultural fit and values your employees. Many buyers will want to retain your top talent, especially given the challenges of hiring in the current economic environment. You can have conversations about employee agreements and management pools, so your employees can participate in equity options.
- How long will I need to stay on post-closing?
This answer will depend on your current involvement as well as the buyer’s needs post-close. If you hold the customer relationships, employees trust, and all the institutional knowledge, then you will need to remain with the company longer than a seller that has their process written down, mid-management in place, and a business development team driving customer activity. If the buyer understands your business and intends to take an active part in running it, then you may not need to be retained as long as you would for a buyer that does not fully understand your business and has no intention in taking an active part in managing it. Assuming that you wish to exit the business after the completion of the acquisition, you can expect to remain on board for another one to three years.
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkCorporate.com
Europe: Carl Settle at +44 (0)161 359 4400 / Settle@BenchmarkCorporate.com
Africa: Anthony McCardle at +2721 300 2055 / McCardle@BenchmarkCorporate.com
ABOUT BENCHMARK INTERNATIONAL
Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $6B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 12 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.