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The Importance of Timing When Bringing a Company to Market

Any company sale process features numerous factors outside of the seller's control. These include the overall state of the economy, finance market behavior, and advancements within specific industries. Most sellers do not fully appreciate that taking the time to thoughtfully prepare a company for its own sale is one of the biggest opportunities to exert control in the process. This opportunity should not be missed.

In business, thinking long-term is crucial – if the overall goal revolves around an exit, business owners need to take advantage of their ability to shape and polish their companies in a way that will ultimately increase their chances of a successful exit. Preparation is key and when a sale is being contemplated, timing is essential. The earlier sellers start preparing, the higher their chances of finding the right buyer and successfully exiting. Ultimately, owners that plan and take enough time to address small issues/details make their businesses more attractive to both financial and strategic acquirers.

 

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Typically, it is not feasible to make radical changes to the nature of a business, product line, or management structure just before a sale, so conducting an internal review is generally the most time- and cost-effective approach – and one that gives sellers the best chance to maximize value. Below is a summary of key items for review prior to your sale process.

 

  • Financials – Getting your company's financials in good shape is essential and will ultimately facilitate getting a deal through each stage of the process smoothly. Choosing adequate accounting principles and standardizing monthly, quarterly, and annual statements (P&L, Cash Flow, and Balance Sheet) typically ensures businesses are valued fairly. Being able to show strong performance credibly – and present long-term sustainability – is essential. 
  • Litigation – If possible, sellers should settle all litigation before coming to market. Litigation is simply part of doing business, and buyers understand that. However, any more serious or particularly risky legal disputes will present an element of perceived risk and should be dispatched prior to the sale process.
  • Online Presence – Investing in sharpening the company's website and overall online presence is often a worthwhile use of time and resources when contemplating a sale. Consider developing and regularly updating the company's website. Be sure to announce company "wins," partnerships, contracts, and milestones on social media platforms. Prospective buyers will most likely access every available platform when engaging in purchasing activities; the more quality information they find, the better.
  • Management – In most cases, the Owner/CEO's leadership, relationships, and practices were key contributors to the business's overall success. When looking for the best deal, sellers must convince buyers that the stream of sales/earnings will remain unchanged (or, even better, grow) after they are no longer behind the wheel. This can be done by elaborating a succession plan (hiring/grooming a number two to take the Owner's position) and delegating critical tasks/functions of the business to members of the team that will remain with the company post-acquisition. 

Although the preparation period requires time and resources, by putting the effort in early, sellers can best leverage their companies’ overall position when entering the market. The chance of a successful transaction increases proportionately as time and effort are invested into preparation. When the business is fully prepared for a sale, all parties win, and the process usually runs most smoothly.

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Out of Africa: How the M&A Market is Evolving South of the Sahara

Benchmark International has recently opened a new office in Cape Town, South Africa (see 3rd July blog post), headed up by Andre Bresler and Dustin Graham. This is an exciting development for Benchmark International, in a dynamic evolving market.

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