A family business is technically defined as an organization that is owned and operated by at least two members of the same family. Family businesses actually account for around two-thirds of all companies worldwide, and 90% of companies in the U.S. The largest 500 family-owned companies generate annual revenues of $6.5 trillion. Global research has also demonstrated that well-run family companies are more profitable and stay in business longer than other companies, even with the many challenges they face.READ MORE >>
If you are considering selling your business, you undoubtedly need to understand its value. Unfortunately, arriving at that answer can entail many different methodologies, and it often involves the familiar valuation formula of applying a multiple of Earnings Before Interest, Tax, Depreciation, and Amortization (EBTIDA).
For example, if a company boasts EBITDA of $1 million, and a five times EBITDA multiple is applied, the company’s estimated value is $5 million. But how do we know what multiple applies to your business? And how do we know if the EBITDA number is even accurate? After all, EBITDA will not be the same for every business.
If you are considering selling your business, you will need to have a clear understanding of its type of customer revenue because it can significantly impact the value of your business. Sometimes people confuse recurring revenue with repeat revenue, but it is essential to understand how they are not the same thing.
Recurring revenue stems from a contractually bound legal agreement for a solution delivered over time. It is usually contractual over one or multiple years, and because it may carry penalties or fees if the customer leaves, it can be counted on into the future. This makes it highly valued by prospective acquirers because of its predictability and lower risk.
However, recurring revenue does not have to be contractual to be valuable. Depending on the business and the services offered, it can be too costly or too much of a hassle for a customer to leave or switch providers. An excellent example of this is customer relationship marketing companies that collect large amounts of valued data over time, making it more beneficial for clients to stick with their services. Below is a list of the different types of recurring revenue.
Is the bull market for privately held companies over? No, that’s not (yet) the reality. But one of the hallmarks of the glorious decade for selling businesses is no more. And unfortunately, many of the acquirers’ gatekeepers weren’t around the last time there was a bull market that looked like this one.
So what is this new normal? Let’s first look at the old normal that we enjoyed from 2010 to 2019 - a nice, slow, smooth macroeconomic recovery. The normalcy of the “teens” allowed small and medium businesses to grow smoothly under ideal conditions. As a result, many businesses experienced near-constant year-over-year growth. And when they’ve failed to do so (or failed to do better), the reasons for the deviation could almost always legitimately be traced directly to some internal event; perhaps the loss of a key salesperson, the launch of a bad enhancement, the lack of ability to pass on an increase in inputs to the customer, or the inability to keep up with a specific competitor.READ MORE >>
Selling your business can be an emotional experience. You certainly don’t want to be left at the end of the process with a sinking feeling that you have made a bad deal or sold to a buyer who doesn’t appreciate the value and legacy of the company you have built. However, there are things that you can do to avoid seller’s remorse; we will discuss several of them in this article for you to consider.
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It’s best to begin putting together an exit plan sooner rather than later. Preparing well for the transition of a business requires time, action, and significant attention. For many business owners, their business represents the majority of their wealth. Planning for the transition allows you to have enough time to minimize taxes, prepare financially for a living situation without the income from the business and put a plan together for the next phase of life. Although typically, entrepreneurs are not the retiring type, knowing what your next move will be can be very important for your state of mind post-sale. Seller’s remorse can often be avoided by beginning to plan for the transaction three to five years before the business owner wants to exit.
What’s Your Competitive Advantage on the Market?
Consider why prospective buyers would be interested in purchasing your company. You should be able to identify its assets in order to get a proper business valuation. How unique is your product or service offering? Do you outperform the competitors in your sector or in a particular geographic area? You will also want to consider whether your revenues are stable, growing, or declining. If you understand why someone would be interested in purchasing your company, you will be more equipped to enhance those qualities and effectively articulate them to buyers.READ MORE >>
We have all heard the horror stories from lower middle market business owners. Private Equity buyers will come in and get rid of all of my employees, borrow an absurd amount of money to finance the acquisition, thereby straining my company’s balance sheet and income statement, and then, light a match Goodfellas-style when they are done extracting value from it. But, I’ll let you in on a little secret? The days of financially engineering a path to outsized profits are long gone. While there certainly was an era where Private Equity funds looked to lock in a guaranteed “win” by over-levering the balance sheet, stripping the Income Statement of “fat”- read, people- and quickly flipping to monetize the win, those days are largely behind us. Today, most professional buyers value the team in place more so than any perceived competitive advantage with the product or service offering. I’ll say that again, buyers often view the team as the most important determinant of success- more so even than the core product or service offered by the business.READ MORE >>
Mergers and acquisitions are effective solutions for growing a company, getting a competitive edge, accessing new resources, lowering risk, tapping into new markets, and acquiring key talent. Obviously, these are all very appealing to investors and upper management. But employees do not always see it this way.
In actuality, employees often view such a major change as a threat. These negative feelings can lead to employee retention problems, especially in today’s world where labor shortages are already a significant problem. Staff members may feel uncertain about the future of the company, how secure their job may be, how the culture will change, and how a change in leadership will impact them. They can also have their concerns worsened or blown out of proportion if there is not a clear line of communication about what is happening with the company during a transition. Sometimes employees will feel a sense of betrayal. Furthermore, some team members may feel guilty if they keep their jobs while coworkers are victims of downsizing or restructuring. Combine all these factors and quickly end up with people looking for work elsewhere. But that is not good for any deal. Why?READ MORE >>
Earnout Agreements have become increasingly routine in deal structures over the last several years as they are most widely used during times of political and/or economic uncertainty. The earnout payment is additional compensation paid in the future to the seller after the business is sold. An earnout agreement can help bridge a valuation gap or encourage the former owner to remain for a longer period of time following the close of the sale. They should only be considered when the company will continue to operate the same in the years following the sale at the time of closing. While sellers can sometimes be nervous when it comes to agreeing to an earnout, there are protections for yourself that you can keep in mind.
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When structuring the earnout, it is important to consider the financial metrics used and choose your benchmark carefully. For example, buyers will often prefer to use an EBITDA target as they believe this will be the most dependable indicator of the business's profitability. On the other hand, typically, sellers do not like using EBITDA due to concerns that the buyer can manipulate the number to benefit the buyer at the end of the earnout period. While sellers usually prefer a marker based on the business's gross revenues, gross profit can sometimes be used as a good compromise for both parties. Suppose an EBITDA calculation must be agreed to move forward with the deal. In that case, the seller can ask for various expenses, overhead costs, etc., to be excluded from the calculation.
As the owner of a business, you face a slew of tough decisions nearly every day. One question you may have asked yourself is whether you should sell your company. Several factors can influence your decision to sell, some of which you may not have even thought about. Here you will find a comprehensive list of possible reasons to help you decide if and when selling your business is right for you.
It's at a High Point
Over time, most businesses face different cycles of highs and lows, and potential buyers prefer to acquire companies that are thriving and have a positive future outlook. When your company is performing well, and profits are high, you can opt to sell to get the maximum value in a sale. You may not be ready to retire or move on, but if you sell at the right time, you can make the most money possible and pave the way for a more secure financial future. This can also help you avoid selling at a later date for less value, which would mean less money for your retirement.
If you are far from being ready to retire, there are ways to structure a deal to stay on with the company, working for the new owner and helping them grow the business. This can help you start the transition to your full exit. And in this case, if the business declines or an economic recession occurs, you do not face the risk of losing value because you got out at the right time.READ MORE >>
There are strategies available for business owners who are in need of additional capital to grow their business. The partial sale transaction has gained popularity over the last couple of years. When business owners find themselves with limited operating liquidity, they are unable to create the type of growth they desire. A partial sale can bring additional resources into the business that can set into motion long-term growth strategies, increase operational stability and recruit new hires. If you are looking to downsize your company, you can invest that money into different opportunities that may offer you a higher return on your investment.
A partial sale of your business gives you the opportunity to remain involved in the business that you have spent decades building. Following a partial sale, many business owners serve as advisors, senior executives, board members, etc., to assist the buyer with their transition period to new ownership. Smart buyers are open to customizing the role and involvement of the seller once the deal has closed in order that the seller remains with the business for months and years to come.
So if you are a business owner considering selling your company, the good news is that right now, it's a seller's M&A market. By October of 2021, total M&A deal activity reached $4.4 trillion, which is an increase of 92% compared to a year ago and is the strongest opening period for M&A since 1980. In addition, merger activity resulted in deals totaling $1.52 trillion in the three months prior to September 27, 2021. That's up 38% from the same quarter in 2020—and more than any other quarter on record.
In a seller's market, demand is high for assets that are in limited supply, giving sellers more pricing and negotiating power. This demand can be attributed to a recovering economy, high cash balances, big government spending, new SPAC buyers, and low-interest rates. Plus, investors are flush with cash and ready to spend it on acquisitions that can help create growth or add capabilities. When market conditions shift, buyers have the upper hand in deal negotiations. And this could happen when the U.S. Federal Reserve increases interest rates in the next year or so.
The Labor Shortage Persists
The COVID-19 pandemic has impacted companies of all sizes, but small businesses have certainly been hit the hardest. First, there were total shutdowns, followed by financing problems due to slowed business, and now it is labor shortages that are the latest issue as the world works towards recovery.
The slew of workers leaving the workforce altogether is fueling a growing labor shortage in what seems to be every industry. Demand is up, and supply is down. Businesses are facing concerns with not having enough people to get the job done—especially in sectors such as healthcare and technology. These spaces are seeing attrition rates of 3.6% and 4.5% higher, respectively, than last year. Research even shows that 36% of workers who quit their jobs did so without another job lined up.
And the labor shortage is an issue that is happening on a global scale, from the US to Canada to Europe. According to the US Census Bureau, many businesses struggle to retain and attract employees, and 49% of business owners say the labor shortage is affecting their business. And a Canadian study reported that 30% of Canadian business owners say the top motivating factor for pursuing an acquisition is gaining access to new talent. That number is up from 20% before the pandemic. Additionally, a recent Eurostat survey found that, in the third quarter of 2021, a worker shortage was hampering production at 83% of industrial companies in Hungary, 50% in Poland, and 44% in the Czech Republic.READ MORE >>
2021 Was a Record Year
In 2021, dealmakers worldwide announced $5.6 trillion in M&A transactions (that’s 30% higher than the previous record), and the U.S. reported $2.9 trillion in transactions (that’s 40% higher than the previous record). While 2021 may have been a record-breaking year for middle-market M&A activity, 2022 should be an excellent year for sellers.
Last year several factors drove deal activity to new heights:
- Pent-up activity from the previous slow year because of the COVID-19 pandemic
- A wealth of capital seeking investment opportunities
- Potential tax changes this year
- Strong economic growth
- Continued low-interest rates
After the trials and tribulations of 2020, no one really knew what to expect going into 2021. Yet, for the world of M&A, it couldn’t have been a more pleasant surprise.
Last year has most certainly been a record year for M&A deals, making a huge comeback from 2020. In 2021, the number of announced deals exceeded 62,000 globally. That’s up an unprecedented 24% from 2020. Deal values reached an all-time high of $5.1 trillion.
Almost all sectors are showing signs of recovery from 2020. Values are up and multiples are rising, with strategic M&A multiples at an all-time high (a median multiple of 16x EV/EBITDA).READ MORE >>
Deal fatigue is a condition that can arise during negotiations where involved parties begin to feel exhausted, discouraged, and frustrated in their attempt to reach an agreement. The negotiation process can sometimes be lengthy and demanding and requires players to spend valuable resources such as time, money, and energy. The inability to compromise in such negotiations not only depletes these resources but also can ultimately lead to a potential deal falling apart. Deal fatigue is a common obstacle in the world of mergers and acquisitions, one that both buyers and sellers alike have faced. From this, however, dealmakers around the globe have observed a few preventive measures that can be taken to ensure a successful transaction.READ MORE >>
You’ve proven you are an expert at running a successful business, and you know how to make money. But are you an expert when it comes to retirement? There are certain financial factors that high-net-worth individuals should consider leading up to retirement.READ MORE >>
Selling a business comes with its share of challenges and concerns. Many business owners do not realize just how much time and energy is required to facilitate the sale of a company and are blindsided when they embark on the M&A process. The good news is that many of the pitfalls around selling can be avoided by learning from others' mistakes, like the 10 outlined below.READ MORE >>
Selling your business is a paramount moment in your life. It’s something you absolutely want to get right so that you can extract the most value out of the deal—and so that you are protected from being swindled by a savvy buyer. It also takes a great deal of time and energy to sell a company, which can be rather difficult to spare when you are trying to focus on running a business. Most people simply do not have this time, energy, connections, or expertise that is required to put their company on the market. This is where the importance of an experienced M&A advisor comes in. By partnering with an M&A expert, they handle all the details of a deal, including due diligence, negotiations, marketing, vetting, and ensuring that you get the most value for your business. They also know how to navigate bumps in the process, and manage the expectations of all parties involved.READ MORE >>
Timing the sale of a company can certainly be a tricky decision. You don’t want to sell too soon, and you don’t want to sell too late either. In both scenarios, you risk leaving money on the table if the timing isn’t right. So what is a business owner to do?READ MORE >>
A Seller’s Market Versus a Buyer’s Market
In a seller's M&A market, excess demand for assets that are in limited supply gives sellers more power when it comes to pricing. Such demand can be generated and galvanized by circumstances that include a strong economy, lower interest rates, high cash balances, and solid earnings. Other factors that can instill confidence in buyers—leading to more bidders willing to pay a higher purchase price—include strong brand equity, significant market share, innovative technology, and streamlined distributions that are difficult to emulate or recreate from scratch.READ MORE >>
As the owner of a Software as a Service (SaaS) company, there are several strategic steps you can implement in order to drive growth and maximize the value of your business.
1. Expand GeographicallyREAD MORE >>
If you are considering selling your company, you should be aware of a certain menace that could have you in its crosshairs. There are direct buyers out there who intentionally prey on business owners, attempting to acquire a company by blindsiding its owner with big promises and, more importantly, taking advantage of their lack of guidance from a seasoned M&A professional. These buyers purposely look to avoid competition for a company because competition drives valuations higher, and they want to make an acquisition on the cheap—in addition to other shady maneuvers.
Bait & Switch
Some buyers will attempt to pull “bait & switch” tactics. To initially intrigue a seller, the buyer will present a high dollar amount. As they conduct due diligence and get the target more and more committed to the deal, they begin chipping away at the value until they reach a price and terms that are far more favorable for the buyer. This is typically an exhausting process for the seller and can lead to plenty of regret. If the deal falls apart, the seller may be reluctant to restart the process with another buyer, thinking the process will just be the same. In reality, it could have been completely different for the seller if they had a reputable M&A specialist on their side from the beginning.
It’s no surprise that the COVID-19 pandemic slowed M&A deal activity overall in 2020. According to data from PitchBook, more than 2,000 transactions closed for a value of $336.8 billion in Q2 of last year. That represents a 41 percent decline in the number of deals from Q1. Yet, deals did pick up in the second half of the year, which is likely to continue, as businesses are poised for improved economic conditions that leave COVID-19 in the rearview mirror.READ MORE >>
As a business owner, maybe you haven’t given much thought to selling your company. Or maybe you’ve bounced the idea around but not too seriously. It’s pretty common for business owners to think, “I have years before I plan on selling my business. Why would I worry about that now?” Well, here’s the thing. Life is unpredictable. Just look at how prepared the world was for the COVID-19 pandemic. We think it’s safe to say that no business owner was prepared for that.
But being prepared for the unexpected isn’t the only reason that it is important to have your business in “sale ready” shape at all times, even if you’re not ready to sell. If the company is not in ready condition, it could cost you financially. And it goes beyond that. Always operating your company as if you are ready to sell accomplishes several very beneficial objectives. It ensures that you are operating at peak performance with a focus on profitability at all times, and it helps you avoid being too late to the game to make the necessary changes to be ready to sell. A person’s priorities in life can change quickly or even gradually over a span of years, and you might not have the time to correct any issues that would impact the valuation of your company and, ultimately, its sale price. It’s important to remember that properly preparing a company to go to market can take years. When push comes to shove, if you end up in a situation where you need to sell, not being ready can be a costly mistake.READ MORE >>
Though every business will go through changes as it evolves, being acquired by a business is perhaps the one that can be the most stressful for its employees. There can be much uncertainty for a company that is acquired. If not handled properly, the buyer can lose some of their people (along with their customer relationships, institutional knowledge, etc.) that made the company successful. Managing the change positively during this tumultuous time can reduce a mass exodus after a sale is completed.
Key employees may be worried about whether their jobs will be intact after an acquisition. Perhaps they feel their role won't be needed, or the buyer will want to use their people to perform their functions. At the same time, the buyer may be worried that these key employees will leave. Leaders and other influencers within organizations set the tone for a company's culture, innovation, and strategic initiatives. Losing them reduces the value of the company they are acquiring.
One key to reducing uncertainty for the acquired company’s employees is first to create readiness for change. People will resist change unless they are ready for it. On the other hand, when they are open to change, employees are more likely to accept everything that comes with it. These employees will be an essential part of the transitional period after the acquisition. Getting their buy-in will pave the way for creating a stronger company in the future.
In their book Developing Management Skills, Whetten and Cameron suggest four ways to create readiness when leading positive change:
Benchmark best practice and compare current performance to the highest performance
Within the context of an acquisition, it's possible (likely even) that each of the involved organizations can perform certain functions better than the other. This may be one of the catalysts behind the acquisition. In that respect, synergies can be experienced when buyers and sellers learn each other’s best practices and implement improvements. Improvements can mean doing things better, faster and/or cheaper.
Institute symbolic events to signal the positive change
Symbolism can have a significant impact. The authors indicate that to be "successful in leading positive change, you must signal the end of the old way of doing things and the beginning of a new way of doing things." This can be accomplished in a variety of ways and can be elaborate or more reserved.
Create a new language that illustrates the positive change
Changing the way people talk about the change that is occurring is vital. If negativity abounds, positivity must replace that language. Taking the time to reframe things with a positive outlook can impact how employees view change.
People are typically against change because of the unknown. Finding common ground and having people participate in the change helps. Converting resistors is especially important because they have a way of influencing the rest of the team. Proactively identify the employees most likely to undermine the change and help them get on board first. They will, in turn, help persuade other employees.
Helping people understand the importance/urgency of the change that is happening through the acquisition will increase the likelihood they will stay and help ensure a smoother transition of ownership. The key is conveying that the company's employees are an essential part of the company's success going forward and preparing them for the change they will experience.
Benchmark International Buyer Profiles
Want to be the first to know when new opportunities come to market that fit your acquisition criteria? Create a buyer profile today. While you're there, be sure to check out all the resources we've created specifically for buyers, including opportunities, on-demand webinars, buyer events, and our latest edition of The Mark magazine.READ MORE >>
Many business owners believe that enlisting an expert in their industry is the right way to go when selling their companies. But if you want to rake in the most value for your business, there’s a better way.
There is no question that mergers and acquisitions are complicated and subject to constantly changing market conditions and industry trends. An industry expert might know plenty about a particular industry, but they are not experts on selling and buying businesses. A mergers and acquisitions firm is.READ MORE >>
The right time to retire is going to be different for everyone based on individual circumstances and goals. While finances are obviously a major factor in the decision, being emotionally and mentally ready is equally important. Here are some points you should consider if you are thinking about embarking on retirement.
Retirement hinges upon having the appropriate income to support a comfortable lifestyle in the future. This entails having an accurate and realistic picture of what your expenses will be and how much you will need in order to cover them, including income from your savings, pensions, social security, 401ks, IRAs, and any other assets. The earlier you plan to retire, the more significant your nest egg will need to be. Waiting a few years can help you build up more financial security through tax-advantage investment accounts. So if you love what you do, a later retirement means that you can continue doing it while you shore up your savings for the future. A common algorithm for retirement planning is to have savings that are 25 times the amount of your annual expenses.
When heading into retirement, it is advised that you make sure you do not have outstanding debt in the form of high-interest credit cards and outstanding loans aside from a mortgage or car financing, which can be taken into account for your needed expenses. By eliminating debt, your retirement income can be used for current expenses instead of past expenses and offer you added peace of mind.
While there is no way to be sure what the future holds, if there are signs of an economic downturn, you may want to hold off on the retirement plans for a bit. This will give the markets time to recover, which will help you recoup your invested assets and retire with a better bottom line.
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You have worked so hard to build your business and when retirement is finally on the horizon, it is a very exciting time. But it can also come with many questions. These tips will help you navigate the ins and outs of retirement so that you can live your best life.
Keep Making Plans
Just because you are approaching retirement, it doesn’t mean you are retiring from life. Keep planning for your future. Consider five-year plans and goals. Think about taking college classes or acquiring new skills you have always dreamed about. Getting another degree, learning something like playing an instrument, or learning a new language can be great ways to keep your juices flowing and open up new opportunities in life.
Explore the Best Places to Retire
The world is brimming with amazing places to consider for your retirement years. Maybe you are perfectly content staying where you are. But have you even thought about the possibilities? Check out our article about some of the greatest places to retire…and be inspired.
Have a Solid Financial Plan
This includes investment options, taxes, and more. There are many ways to invest, such as mutual funds, stocks, bonds, real estate, dividends, CDs, annuities, and exchange-traded funds. Additionally, having an exit plan can ensure that your future is protected. Prior to exiting your company, mergers and acquisitions strategies can help you grow your business and maximize its value for a sale, laying the groundwork for worry-free retirement wealth. Experienced M&A advisors can help you make the most of this. You will also need to consider how much you will need to pay in taxes after you retire. This is something you will definitely want to get right. Some estimates suggest that for each 1% error in effective tax rate, you face an 8% error in your final savings balance.
Maintaining a routine can be a major game changer for keeping your sanity in retirement. You no longer need to go to the office. So what do you do? It is easy to find yourself meandering and not knowing what to do with yourself. That’s why it’s important that you stay busy and have some sort of structure to your everyday life now that you are no longer on the clock. Engaging in activities such as volunteering, gardening, and exercising can keep you healthy, happy and regimented.
Maintain a Youthful Perspective
They say age is just a number. And there are actually studies that support how mental attitude can improve overall health and even reverse the effects of aging. Thinking young can actually help keep you feeling and functioning as young. It helps to stay inquisitive, continue to develop and improve yourself and expand your horizons. Falling into a rut after retiring can be detrimental to your state of mind and your physical health. It can also be very helpful to maintain social relationship with younger people to keep up with changing perspectives, get inspired, and hear about more than gripes regarding the aches, pains, and medications associated with aging.
Map Out Your Legacy
In addition to the impact you will be leaving on the world through your professional endeavors, you will want to make plans for your estate to determine what you wish to leave for your heirs. This is when a financial planner can be of great help. You will need to think about estate taxes, appropriate inheritances, and the roles of your family if they will be taking over your business.
Consider Catch-Up Contributions
You already know that there is a limit to how much you can save in your IRAs or 401(k)s. But did you know that once you reach the age of 50 in the U.S., the IRS allows you to make additional catch up contributions that are beyond annual contribution limits? It’s a way to make it easier for savers over the age of 50 to boost their retirement savings.
Understand How to Protect Yourself from Fraud
Fraudsters are known to target people over the age of 60, especially in today’s digital society. Stay educated on what scammers are up to and know how to discern between what may be real and what may be fake regarding emails, texts, phone calls, and the physical mail. A good rule of thumb is to remember that if it sounds to good to be true it probably is. Also, unsolicited offers can be common traps. Other things you can do include not answering robocalls, not clicking on pop-up ads or email attachments, being skeptical of free offers, and not paying up front for promises.
Think Long Term
Today’s life expectancy rates are much higher than they used to be just decades ago. You should plan your retirement with a long future ahead. This is not only good for your mental wellbeing, but also important for your financial future. Consider that your savings will need to last longer. Your healthcare costs may be higher. Search for retirement calculators online to help you get a better picture of what your needs will be.
Get a Dog
The many benefits of having a dog to health and wellness are well documented. Dog owners have been proven to enjoy lower blood pressure and stress factors, and need fewer doctor visits than those without pets. Having a dog can also help to keep you active and engaged with other people. Plus, all that unconditional love releases beneficial hormonal chemicals such as serotonin and oxytocin that are proven to fight depression and make you feel good.
Ready to Retire?
Contact our M&A experts at Benchmark International to start the conversation about selling your company, planning your exit strategy, and getting on the road to a prosperous retirement.READ MORE >>
Many factors can impact middle-market M&A deal making, but one of the most significant issues that can affect closing is a valuation gap between the seller and buyer. This tends to be more common during a seller’s market because business owners with successful companies are inclined to wait for the best offer, versus a buyer’s market that occurs when there are fewer buyers, which motivates sellers to jump at an offer. Unrealistic expectations about valuation multiples often stem from the comparison of a mega deal to a middle market deal—a situation under which the same multiples are typically not going to apply.
There is also often a disparity between what a seller needs to maintain their retirement lifestyle and what value can be extracted at the time of the sale. There may be differences between a buyer’s offer, what they pay, and what the seller ultimately receives, as taxes are always a factor in a transaction. Additionally, the timing of the deal and the perception of risk regarding future growth and earnings flow for the business can play a major role in the size of the valuation gap. Selling a business is a highly complex process and it comes with great emotional implications for a seller. Emotional ties coupled with overt optimism can easily cloud one’s vision when it comes to the actual value. As a business owner, you put in a great deal of work starting your company and building it into what it is today. In contrast, selling that business is completely unchartered territory for most owners. When you are looking to sell, you need to be realistic regarding the company’s current value and its growth rate, and what the buyer will be getting out of their investment. Buyers are not going to recognize the hard work you put into starting the business in the same light that you do. All that work you did in the beginning is not on their radar—they are going to be focused on their returns.
Valuation gaps also result when private equity firms and strategic buyers compete for quality investments and relatively inexpensive financing is available. This can be both good and bad for middle-market business owners. Significant buyer interest creates considerable competition for quality deals, which is great. But at the same time, if the market is hot and demand is high, unrealistic valuation expectations and skewed perspectives can result in a valuation gap.
This is why a thorough evaluation of a business is so crucial to the M&A process. A good M&A advisor will take meticulous steps to best determine an accurate current business enterprise value, while also managing the seller’s expectations of a valuation range before going to market. So, if you are a business owner, and you plan to approach buyers without professional M&A representation, you need to understand company valuation gaps, your intrinsic risks as a seller, and how to bridge these gaps. This can require a great deal of education on your part and can be very time consuming. Or you can simply enlist professional M&A advisory expertise and have the peace of mind that the fate or your business is in the best possible hands. The best advisors will work diligently on your behalf to help you attain your goals for your business and your financial future. It requires a team with proven experience, resources, and best practices to successfully navigate the many legal, accounting, due diligence, and marketing considerations involved in arriving at an accurate and realistic company valuation and getting a quality deal done.
Engage Our Expertise
Our top-notch M&A analysts at Benchmark International can help you with your company, from creating growth strategies to selling it for maximum value. Set up a time to talk with us and we can determine what solutions are best for you and your business.READ MORE >>
The explosion of the tech bubble, popping of the telecom bubble, 9/11, the financial crisis, now this. One of the benefits of working on mergers and acquisitions through unfortunate times is that you gain a good perspective on what lies ahead after the crisis passes. More specifically, you learn how acquirers will react and this in turn teaches you how to minimize the damage during the crisis. Every crisis is different but with four or five now under the belts of our senior staff, Benchmark International has been able to identify the acquirer behaviors almost certain to appear after this – and the next, and every other – dip in the inevitable rise of the middle markets.
To be clear, the dip here is not one of buyer interest or even multiples being offered to this point. As we near the fourth quarter, we continue to close deals, sign letters of intent, and bring clients to market. Please see our earlier post “What is Covid-19 Doing To The M&A Markets Now?” which continues to accurately describe the conditions we are seeing. What we mean by “dip” is the likely drop in your company’s revenue and all the other financial metrics that influences - and to some degree controls.
It is no secret that acquirers’ primary tool for determining their interest in, and their valuation of, a business is its financial performance. Businesses with growing revenue, healthy margins, and consistent performance sell for the highest multiples.
The situation we now face likely threatens all three of these characteristics and if your business has otherwise had a stellar historical performance concerning these three metrics, you may be extremely concerned that its performance during this period of the global slowing will forever mark its luster and lower its sale price.
While it is true that recapturing lost growth (i.e., growth that is not occurring at the moment) is hard to do, this is distinct from the real issues here – preserving the high multiple your business deserves. Fortunately, our experience indicates that your deserved multiple is salvageable – if you know how to do it. Yes, getting those record-high multiples for businesses at the end of the company sale process will be more complicated for the next few years, just as it was in 2009- 2012, but with the right preparation now and process later, you should have no reason to believe your multiple will be subpar in the future just because of the current financial setbacks.
Here are some key things to do and remember:
The processes behind mergers and acquisitions can be quite complicated. Each deal is unique and has its own level of intricacies. However, all M&A transactions tend to follow a basic framework of steps. Most M&A advisory firms follow this basic framework, but bring their own methodologies to the table. This outline will give you a rudimentary view of the process.
What Are The Steps In The M&A Process?
1. Target List Creation
In order to engage in the selling or buying of a business, you must have potential buyers or sellers. Suitable M&A targets can include competitors, vendors, or customers. This is also a good time to consider how much geographical factors should be taken into account.
2. Contact Initiated
Once the target list is established, contact is made and discussions begin to gauge the interest level of the buyer or seller.
3. Sending of a Teaser
A teaser is a document that sellers send to buyers. It supplies just enough information to entice the buyer into wanting to know more. It showcases topline info such as the company’s product or services, its unique selling points, industry overview, ownership structure, potential areas of growth, and high-level financials.
4. Confidentiality Agreement Signing
This ensures that all sides in the deal agree to keep all discussions and materials confidential.
5. Sending of the Confidential Information Memorandum (CIM)
The CIM serves is drafted by the sell-side of a transaction and serves as a type of handbook. It provides all the information a buyer needs to ascertain whether they want to make an offer, such as company management, operations details, financial data, future projections, customer diversification, market opportunities, competition, and other relevant specifics.
6. Submissions of Indication of Interest (IOI)
Upon their review of the CIM, the buyer then expresses interest in moving forward by submitting a non-binding written offer. An IOI typically provides a valuation range for the sale price, transaction structure, timeframe, and other important details. It limits the buyer’s time and financial resources devoted to the deal if the proposal falls short of expectations and other bids. For the seller, an IOI helps them to measure the market appetite for the company, compare different buyers’ views on value, and perform preliminary due diligence on the buyer’s ability to complete the transaction.
7. Management Meetings
After the initial communications that establish interest on both sides, it is time for the buyer and seller to meet and take the conversation further. Both sides take this time to learn more about each other to get a better idea of compatibility and whether it is a good fit.
8. The Letter of Intent (LOI)
The buyer submits a detailed document with a price and deal structure that details items such as closing dates and conditions, an exclusivity period, any break-up fees, management compensation, escrow, and so on. These are usually non-binding, but they can be denoted as binding.
9. Formal Due Diligence Process
This important phase is when all documentation and records are compiled by the seller and provided to the buyer. The findings help the buyer assess their risk and improve the decision-making process. Due diligence examines an extensive level of information on the company, including all financials, intellectual property, customer base, management, talent, synergy, outstanding litigation, technology, infrastructure, stockholder issues, production, inventory, supply chains, real estate, marketing plans, and anything else that is relevant to the business.
10. The Purchase Agreement
A Purchase Agreement supersedes any previous IOI and LOI. This binding document lays out the final terms of the deal including the purchase price, a detailed list of definitions used in the agreement, timeframes for the delivery of final statements, executive provisions, representations, warranties, schedules, indemnifications, closing conditions, and break-up fees.
11. Pre-Closing Period
Sometimes there is a pre-closing period during which the seller and buyer prepare all deliverables and fulfill closing conditions such as government approvals and third-party consents. The duration of this period can vary depending on the closing conditions.
Once all of the closing conditions are met, the transaction is ready to close. Funds are exchanged and the buyer assumes possession of the business.
13. Post-Closing Period
After the deal closes, there are usually post-closing financial adjustments and integration topics to be addressed between the seller and buyer.
Ready to Make a Deal?
Our M&A experts at Benchmark International would love to hear from you regarding your company and its potential. Our world-renowned team offers the unparalleled transaction experience, remarkable resources, and global connections that you need in your corner to in order to get the most value possible out of your M&A deal. Learn more about our unique Benchmark Fingerprint Process here.READ MORE >>
Every business is unique and grammar experts will tell you that you cannot place a modifier before the word “unique”. That said, selling government contracting business is a very unique art. Here are some insights from Benchmark International’s extensive experience with these engagements.
What makes selling a government contracting business unique?
Most importantly, there are far fewer financial buyers (e.g., private equity funds, family offices). This means the potential buyer population is both smaller and skewed toward strategic buyers, such as competitors, suppliers, and businesses in adjacent sectors. Therefore, the buyer outreach effort must be more robust, the marketing strategy, as with all writing, must focus on the proper intended audience, and each potential buyer that reaches out must be treated with extra care.
What keeps other buyers away from government contracting businesses?
The main issue is customer concentration. Many companies rely on one specific government or one specific agency for the vast majority of their revenue, for example, the Department of Defense or their state’s Department of Transportation. Knowing how to address this issue is not only key to attracting buyers on the edge of the process but also to stoking interest in all potential buyers in the process. “Customer concentration” is routinely cited in buyer surveys as the number one concern in the early stages of target selection. Thus, failing to address this issue head-on and intelligently can greatly reduce the buyer pool.
Do these businesses trade at a lower multiple than others?
No, there is no “government contractor discount.” These entities are viewed as “counter-cyclical” so when the economy is falling or expected to fall, they can demand a premium over their counterparts that only work with private sector clients.
The business itself may have characteristics – such as customer concentration – that can impact value, but the same is true of any business with any client base. And, to the contrary, the payment history of governments is far better than that of private sector companies and the reliability of these collections gives government contractors a boost on their multiples. This reliability premium moves inversely with the number of bankruptcy filings nationwide.
What type of government contractors get the highest multiples?
To a degree, the same factors that affect any business matter here – defendable intellectual property, long-term customer relationships, moats around the business, the strength of the management team that will stay on after the deal, the stickiness of the product or service offered, reputation, etc.
Additionally, the actual customer contracts draw an excessive amount of attention in these deals.
The longer the contract is the better. For service businesses, a dollar of revenue from a maintenance contract tends to yield more dollars in the sale than does an implementation or repair contract.
Some buyers place a higher value on fixed cost contracts, others on cost-plus or time and materials. Primes tend to get higher multiples than subs but not always, depending on the sub’s specialty. For smaller businesses that will likely have fewer open contracts, the length of time remaining on each contract and its rebid/extension terms are often points of high interest.
Lastly, whether or not the person who has relations with the government office is staying on or not is a big deal. If you are leaving and you have those relations, the sale process must be structured around this fact. This means customization of the type of buyers that are targeted and the story that is initially told to the market. Some buyers won’t mind so they would need to be the primary targets and those that will mind needing to be told at the right time and in the right manner.
What about preserving the set-aside nature of the business?
This is a question that all clients ask but few buyers care about it. We find that most clients don’t use their set aside status to win the majority of their work. More importantly, though, most government contracts do not require the prime to update the government in the event of a loss of status by one of their subs or even by the prime itself. The contracts tend to be “shoot and forget” in this regard. While it can affect some extensions or renewals, we often see that not being the case.
And buyers just don’t care. Today’s multiples are too high for buyers to win company sale processes just because they are looking for a set-aside business. If they aren’t paying for the brainpower, the relationships, the cash flow, or any other standard deriver of value, they aren’t making offers our clients will accept.
Is selling a government contracting business harder than selling a similar business serving the private sector?
Yes, for all the reasons above it’s a bit smaller of a needle to thread. But with the right process, a good deal team, patience, and a motivated attitude on the part of the owner, the process is entirely doable, and these businesses sell every day of the year.
What’s the market like at this minute?
As of the end of July 2020, the market has never been better. We are seeing multiples for all business types staying up at their pre-COVID record levels across the board. Also, we are seeing buyers that previously passed on government contractors reaching out specifically to see what government contracting companies are currently available.
To see a selection of our completed government contracting deals, please click here
T: +1 813 898 2350
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When the time comes to sell your company, you obviously want to get the most value and the highest possible price. There are several steps you can take before going to market to increase the likelihood of you cashing out for more in a merger or acquisition.
- Focus on Profits and Growth
You will want to increase your net revenues and profits, keeping in mind that buyers will focus on EBITDA (earnings before interest, taxes, depreciation and amortization) for valuation. This is the number you want to boost because the higher your EBITDA, the higher your sale price will be. Your company’s growth potential will also be important to acquirers so you should put extra effort into growing your sales, even if it means hiring more sales talent (as long as it justifies the costs—adding salaries and benefits need to be worth the results).
- Get Your House in Order.
The M&A process will certainly include a comprehensive audit of your financial records and any other business concerns. It is key to get all of your documentation in order before embarking on a sale. The more complete and orderly your record keeping is, the more confidence it will instill in potential buyers. This also means you should address any unsavory topics, conflicts or legal issues. Getting any discrepancies resolved will prepare you to honestly answer difficult questions and demonstrate your commitment to getting a transaction done. Buyers do not want to be faced with surprises during the due diligence process.
- Do a SWOT Analysis.
Take the time to assess your Strengths, Weaknesses, Opportunities and Threats. You need to understand where your company stands in the current market, how it stacks up to competition, and how to maximize its strengths. If you have a complete understanding of your SWOT profile, you can take the necessary measures to position your company to buyers in the best light possible by uncovering growth opportunities and being proactive against any impending risks.
- Trim the Fat.
Think about any areas of your business operations that could be tidied up, such as redundancies or costs that do not add any value to the company. Can you justify everyone that is on your payroll? Would outsourcing be more cost effective? Can you spend smarter when it comes to equipment? Are you carrying outdated inventory? Is there property that you are paying taxes on that you really do not need? What can you do to avoid adding new expenses? This doesn’t mean you should cheap out on anything that affects your core competencies. But sometimes simply reallocating resources can help you optimize the financial health of your company.
- Get an M&A Advisor.
M&A advisors handle a significant amount of the complicated work that goes into the lengthy deal process. Their exclusive connections will get you access to quality potential buyers. They will help you prepare and market your business effectively, finding ways to make it more enticing to buyers. Another benefit of an M&A partner: not only will buyers know that you are serious about selling, but you will also know that they are serious about buying. They will also help you organize your due diligence documentation and present your financials, coordinate meetings, help with exit or succession planning, and ensure that you have peace of mind through such a momentous time in your life.
If you are ready to sell your company, please contact our M&A advisory experts at Benchmark International to get you on the path to a deal that meets all of your aspirations.READ MORE >>
So you have started to think about selling your business in the near future. Will you be ready? There are changes that you can make now that can make a big difference when the time comes to sell and help you avoid leaving money on the table. Begin by starting to plan 18-24 months before you begin looking for a buyer. Take a look at your business through the eyes of a buyer and ask yourself ‘What would I see as a positive about this business?’ ‘What would I see as a weakness about this business?’. We have included 7 small changes here for you to consider implementing:
- Understand your business’s financials. It goes without saying that buyers are going to be delving pretty deeply into your business’ finances. If you aren’t able to provide statements that are professionally prepared, this can be seen as a risk to buyers. If the buyer doesn’t feel that they can rely on the numbers, they most likely will either offer a lower purchase price or pull out of the transaction all together. You should be prepared to answer all questions and have at least 3 years of financial statements in perfect shape.
- Take a look at your customer concentration. Do you have too much concentration placed on a single customer? This can cause buyers to take pause and wonder what will happen if they lost that customer after the sale. It’s best to begin to look for ways that you can grow your other customers as well as gain new ones in order to reduce the concentration issue. Multiple sources of revenue can lead to a higher purchase price.
- Can your business survive without you? Many business owners become the main point of contact with customers as they grow their business over the years. Now is a good time to begin shifting those relationships to other members of your team. Otherwise, buyers will have the concern that when you leave, clients may leave the company as well. In addition, you should have designated employees that can continue to drive the business forward and increase revenues after you have exited the business.
- In the time leading up to placing your business for sale, be sure to resolve any legal disputes that may be pending. Nothing raised red flags more for a buyer than finding out there is a legal case pending against you.
- Closely analyze the business practices that you are currently using and if you decide that it’s necessary, implement more efficient operating procedures before the sale. This could include reducing or adding employees, or investments in new technology or equipment. Taking these measures before a sale can result in a higher sell price.
- Create a master system of how you access, store, organize and update all of your systems. In most cases, this will be a collection of enterprise software or file folders with controls that have been put into place for who can access what. This system should become a part of your employee culture and be used on a daily basis. A prospective buyer will see that the knowledge needed to run your company does not lie with any one employee, but instead is contained in the systems of the company and can easily be maintained after a sale.
- Organize your legal paperwork and make sure that it is all in order and readily available as prospective buyers will request access to these documents. Review your permits, incorporation paper, leases, licensing agreements, vendor and customer contracts, etc. Ensure that they are current and in order.
Continue to keep your eye on the ball and run your business as if you are going to run it forever. Benchmark International can be your partner throughout this process and help free up time for you to continue focus on running your business operations while selling at the same time. With a team of specialists that arrange these types of deals every day, we can answer your questions and help you determine what is best for you, your business and your exit plan. A simple phone call or email to us can start the process today.
T: +1 615 924 8522
You have poured your life into building your business. Selling it is not only a very emotional process, but it can also be a monumental task that involves many intricacies. Careful planning and preparation before a merger or acquisition can translate into your efforts being rewarded with a high value deal. While there is quite a bit that can go into preparation, the following seven considerations are key to arriving at a successful deal in the end.
1. Protect What’s Yours
Intellectual property can be a company’s most significant asset. It differentiates you from your competition, is an important marketing tool, and can provide revenue through licensing agreements. It is also a major driver of value in a merger or acquisition. Any intellectual property that belongs to your business (proprietary technologies, copyrights, patents, design rights, and trademarks) must be legally protected. Enlist your legal counsel to ensure that all the proper paperwork is filed and current. If you are considering a cross-border transaction, you will want to make sure the property is protected on an international level as well as a local level, as different countries have different laws and requirements.
2. Get Your Finances in Order
It’s never a good look when a prospective acquirer asks for financial documentation and you are scrambling to put it together. This can also delay the process. Before taking your company to market, you will want to compile all of the proper financial and contractual records and have them organized and ready to turn over. Having your finances in order also means that you should seek to resolve any outstanding issues where possible before trying to sell. For example, if you know you have a situation you can probably resolve, getting it straightened out ahead of time can eliminate unnecessary complications during the due diligence process. The due diligence process is also going to require an audit of your assets. A buyer is going to want a complete picture of what they are acquiring. Intellectual property is an important element of due diligence but the process also includes areas such as equipment, real estate, and inventory.
3. Maintain Business as Usual
Going through the lengthy process of selling a business can certainly provide its share of distractions. No matter how easily it can be to become sidetracked or consumed in the details of the sale, now it is more important than ever that you stay focused on the daily operations of the business and ensuring that it is running at its best possible level. This includes keeping your management team focused. Deals can take time and they can also fall through. Every aspect of an M&A transaction hinges on the health of your company at every stage of the game and you need to make sure the business does not lose any value.
4. Think Like a Buyer
As a seller, you obviously don’t want to leave money on the table. That is why it can be helpful that you look at your business from the perspective of a buyer. This will help you avoid being fixated on a sale price the whole time. Think about why they would want to buy your business and what opportunities it affords them in the future. If you can improve your business and develop it as a strategic asset before you try to sell, you can increase its value and get more money.
5. Predetermine Your Role
Sometimes after the sale of the business the original owner executes a full exit strategy and severs all involvement with the business. You need to decide up front what is right for you. To what extent do you plan to relinquish control of the company? Do you wish to remain an employee or a member of the board? How much authority do you plan to retain? You should think these options through before going to market so that you can find a buyer that supports your intentions for the business.
6. Have a Post-Sale Plan
Consider what life will look like following the sale of your company. Think about what your financial picture will look like. How will you invest the proceeds to maintain your financial health? How much cash will you take at closing? How long should the earn-out period be? What about stock options? And don’t forget about tax liability. How much will be paid immediately and how much will be deferred? These are all important questions to ask yourself when anticipating the sale of your business.
7. Retain an M&A Expert
Selling a business is a complicated process and a seller should never go it alone. You may be an expert at your business, but chances are you aren’t an expert at selling businesses. Enlisting the partnership of a M&A experts can not only help you get a deal done smoothly but can help you get the maximum value for your company. M&A advisors know what to expect, they know how to avoid common pitfalls, and they have access to resources and experience that can be game changers for your deal. They can also help you work through some of the difficult decisions mentioned above. Of course, they come at a price, but a price that is worth it when you consider how much their involvement can increase the value of your sale and the chances of the deal being closed.
Ready to Sell?
When you are ready, so are we. Reach out to our M&A advisory experts at your convenience to talk about your options and how we can help you sell for the utmost value.READ MORE >>
Selling a company can take several months to even years, depending on factors such as the state of the business, the industry, the market, and the economy. At Benchmark International, we have created an efficient process that we use as a framework to guide any merger or acquisition from start to finish. While not every deal will follow this timeline exactly, it is what we strive to adhere to and what you can expect from the process, keeping in mind that when several parties are involved, timing depends on when they each do their part.
The 120 Days Prior to Going Live: Strategy Development & File Preparation
First, in order to determine the “go live” date (when we take the business to market) we carefully assess your needs and priorities as the business owner, the completion of audits and taxes, the harmonizing of the business’s external image, and the M&A market calendar.
In the 120 days prior to “going live” with your company, we will go through a preliminary preparation period. This period begins when you and your Benchmark Deal Team sign the engagement and we deliver a data request list to you in order to obtain the relevant information we will need to facilitate a deal. The initial delivery of these documents to us usually takes about two weeks. Then, two weeks after that, we conduct a Q&A session with you regarding the financial data to resolve any outstanding topics. This is when we dig in and do an even more thorough assessment.
A few weeks later, we have our first meeting with you for the presentation of any issues that we found, we request any additional data, and we conduct a preliminary discussion of a marketing strategy. In another 20 days, we have a second meeting to verify the completion of the harmonization of the company’s public image, finalize strategy, and recap any additional data still needed.
Then, in about three weeks, our deal team delivers drafts of the company Teaser and Confidential Information Memorandum (CIM). In the week subsequent to that, we will meet to finalize materials, we prepare market intelligence, and then we are ready to go live.
Two Months After Going Live: Solicitation of Candidates & Expression of Interest
Now that we are ready to go live, we move into the next phase of the process. We start by approaching prospective buyers. We begin obtaining non-disclosure agreements and screening candidates. Within about three weeks, our deal team delivers an interim candidate report to you, classifying candidates into three categories. We then meet to determine authorized recipients of the CIM out of the candidates delivered. Following this meeting, we deliver CIMs to a second round of prospects. You can expect us to be one month into this process when we deliver a finalized candidate report to you, which again classifies the candidates into three categories. Soon after, our team will meet with you to determine the authorized recipients of the CIM out of these candidates. Following this meeting, we deliver CIMs to a second round of invitees. By day 60, expression of interest is due from these candidates.
Two to Four Months After Going Live: Evaluation of Candidates & Offers
Now that we are two months into the process of having gone live, your Benchmark team presents the expressions of interest on behalf of prospective buyers to you. Next, you instruct us as to which candidates should be invited to bid. We then confirm each invitee’s continued interest and they are provided access to a preliminary data room.
At about three months in, letters of intent are due to us from the bidders. We revert to them with any questions raised by the letters of intent. Next, our team presents the letters of intent to you and follows up on any questions you have for the bidders. At this stage, around Day 107, we work closely with you to reevaluate the top bidders, and negotiations begin with one to three bidders. By Day 120, the letter of intent is executed and the counterparty is granted access to the complete data room.
Ready to Sell?
We’re ready to help. Contact our M&A advisory experts at Benchmark International to formulate effective strategies to grow your business or plan your exit strategy and sell your company for the highest valuation possible.READ MORE >>
1. Improve & Grow
Investors seek to buy companies that increase cash flow year over year. Obviously, the more profitable and healthy your company is, the higher valuation it will garner. This means that retained earnings (the amount of profit left over after all costs, taxes and dividends are paid) are an important factor, including how they are reinvested in the business as working capital. It also means you should be focused on lowering expenses and increasing revenues, as the efficiency of your operations is going to be a key driver of valuation. Look at the last three years to see if cash flow is trending upward. If not, you should take measures to get the company on the right course. Companies sell for higher prices when they show that they can continue to grow. Your future growth depends on your ability to identify new markets, adapt to changing technologies, and keep your workforce trained. Buyers look for businesses that have goals and a solid plan for achieving them.
2. Value the Power of Marketing
How marketing is defined when it comes to selling a business is twofold, and both are incredibly important. 1) Effectively market your products or services to customers and 2) Effectively market your company to potential buyers.
Create and retain a diverse customer base that creates recurring profits. Evaluate your marketing plan to determine strategies to boost sales, tap into new markets, get a competitive edge, and increase customer loyalty. The more diverse your customer base is, the more protected you will be if you lose a major customer. This insulation is important to buyers.
When you do the first part correctly, you will be in a stronger position to showcase your company’s strengths to acquirers. In order to best market yourself to buyers, it is smart to work with an M&A advisory firm that has the marketing experience and resources to make your company as appealing as possible.
3. Foster a Strong Team
A large amount of value in a business lies in its people, especially if it has few tangible assets. A prospective buyer is going to want to have faith and confidence in the existing leadership team and that they will remain there after your exit. They will also be more interested in a business that is known as a great place to work. Your key talent beyond management is also critical to the success of the company. They should be motivated, informed, and feel that their futures are in good hands so they are not tempted to jump ship because they are nervous about a possible sale. This is why it is crucial that the details and confidentiality of a sale and are handled very carefully. Employees need to be informed and feel included, but they should not be told about a sale until the proper time.
4. Have Detailed Recordkeeping
In order to sell your company, you will need to have all financial records and contracts related to the business for the due diligence phase of the transaction, and this extends beyond tax returns. Shoddy recordkeeping signals to buyers that there could be problems and that the business’s financial performance may not be portrayed accurately. Being transparent and thorough indicates to buyers that you are serious and more likely to be trusted.
5. Remain Invested
Just because you are planning to sell, do not lose sight of the fact that your business still needs you. It is easy to get caught up in the excitement of the M&A process, but you must keep the day-to-day operations running smoothly. Continue to improve and invest wherever possible and you will not only strengthen the overall value of your business but also demonstrate your commitment to its future success. Buyers want to see that you are doing what’s in the best interest of the company all the way up until your exit. At the same time, a business should not be reliant on any one person. While you should remain engaged through a sale, the company should be able to continue to operate successfully AFTER your exit, as well.
6. Get M&A Guidance
You have worked so hard to build your business and its sale may be the most important milestone in your life. You deserve to have the transaction done right so that you get the maximum value possible for your company. Experienced M&A advisors can not only make sure that the process goes as it should, but they have specific strategies and know-how that will get you as much as possible while adhering to your goals for your future and the company’s. Additionally, savvy buyers have solid knowledge of the M&A process and what to look for. Working with an advisory team will demonstrate that you are a serious seller while protecting your interests and getting you the amount you deserve.
Talk to our Experts
If you are considering selling your company, contact the M&A advisors at Benchmark International and tap into award-winning solutions and unparalleled expertise.
After you have poured your life into your business, there comes a time when you start pondering retirement and planning an exit strategy. Whether you want to assume a smaller role in the company, transition it to a family member, or sell outright to an investor, it is not a process to be taken lightly. Readying a business for sale is a daunting task and an emotional journey. Which is why the first thing you will want to do is partner with an experienced M&A advisory team that is going to understand your goals and your needs, and have empathy throughout the process.
Ultimately, you have two high-level goals for selling your company: for the process to run smoothly, and to get the most value possible. There are many stages that go into making these two goals attainable, and at Benchmark International, we have perfected this process down to both an art and a science. This includes selling at the right time, which is why getting started as soon as possible can be critical to the results.
Our mergers and acquisitions advisors will take a deep dive into learning everything there is to know about your company. (Chances are, we already are very knowledgeable on your industry.) We will be straightforward with you regarding our assessment and what you can do to make your business more valuable and appealing to a prospective buyer. This includes third-party research that vets your company’s reputation in the public space and how to address any concerns.
We will also use our proprietary technologies and global resources to identify the types of buyers that are right for your business, and then create a plan to effectively market your company to these buyers. This gives you a huge advantage as a seller. There are many steps that go into these processes that we can later detail for you to a greater extent should you decide to sell. And don’t worry—everything is handled with the utmost confidentiality and you can rest assured that any buyer is going to be closely vetted. We will never ask you to meet with a potential acquirer that is not suitable and that we don’t believe is in your best interest.
Another important undertaking that our experts at Benchmark International will handle is the due diligence for buyers. Obviously, they are going to want to know a great deal about your company. Buyers also expect to see scrupulous recordkeeping regarding financials, legal issues, and items such as contracts. Our team is here to help you compile the proper documentation, and we can even create a Virtual Data Room to store it securely and conveniently. This includes ensuring the protection of your intellectual property such as trademarks, copyrights, trade secrets, and the like.
We will coordinate all meetings and discussions between you and a buyer, always protecting confidentiality. When a buyer makes an offer for your company, we will present it with honesty as to whether we feel the offer is appropriately valued. We are committed to ensuring that you get everything that you deserve.
When you decide to move forward with an offer, your dedicated deal team will handle all of the negotiations following your instructions at all times. This includes structuring the sale clearly so that all parties involved know their roles moving ahead with the transition of the business. We handle all contracts with full compliance and proper documentation. Not a single piece of paper or communication will go to a buyer without you seeing it first. You can also expect regular contact at all times until an acquisition is complete.
Selling a company is a complicated endeavor and needs to be handled with expertise in order to achieve the right results. Having the right team in place can make all the difference in the success of your exit.
So, the answer to the question, “Now what?” is quite simple: contact us.
Our award-winning M&A analysts are waiting for your call to talk about how Benchmark International can help you sell your company for its maximum value. Reach out to us today and we can embark on this exciting journey together.
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