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Get a professional Opinion of Value for your
company to use as a frame of reference, but do not establish
an asking price. Sellers who let the marketplace determine
the price on a competitive basis get the best offers, especially
if there are enough buyers to create a mini-auction. Quoting
an asking price defines an upper dollar limit and does not
take into account deal structure which may be more important
than price.
Buyers look at reported earnings to
judge if your company can provide high returns, low risk and
affordability. Most private businesses use accounting methods
that minimize before-tax profits, so financial statements
may not accurately reflect the company's true earning power.
As a seller you have the right to adjust or "recast"
the financial statements to portray your company in the most
favorable light. Presenting a 5-year forecast along with 2
or 3 years of adjusted earnings sets the stage for explaining
the past and selling the future.
Properly marketed, a wide range of buyers
should respond to your offering. These include corporations,
investor groups, financial buyers, competitors and individuals.
Take the necessary time to understand the buyers motivation.
Some may be interested only in the company's prior earnings.
Others may be more interested in the location, facility, equipment,
customer list, management or other business assets. Rarely
does the buyer look at a business in the same way as the seller.
Maintain confidentiality about your selling for as long as
possible to protect your company's interests and assets. Beware
of those who may try to use information you provide to lure
away employees or duplicate your products or services. That
means guarding the identity of your company, weeding out the
qualified buyers and not tipping your hand to employees, vendors,
customers or colleagues.
Typically, the search for a buyer involves contacting
several hundred "suspects" and determining if they
have any interest in making an investment or acquisition.
Use regional, national and international databases plus other
gathering sources to build the "suspect" list. You
should make as many direct contacts with the people on the
suspect list as possible to determine their level of interest.
Evaluate and document your company
in detail. Include at least three years of recast financial
statements, the most recent tax return, market research, industry
statistics and an analysis of your company's strengths. Properly
disclose problem areas and potential weaknesses. Orderly,
thorough documentation takes time and effort to prepare. But
this impresses buyers and helps you in control the selling
process. It also saves a great deal of time and expense when
you are in the diligence process.
Raising investment capital, or selling part or all
your business, requires markedly different skills than those
required running it. You'll get the best deal and avoid expensive
mistakes if you ask a professional merger and acquisition
intermediary to assist you. Choose an intermediary with an
excellent track record to coordinate the efforts of a team
that includes one or more associates from the M&A firm,
you, an attorney and an accountant experienced in handling
the financial and legal aspects of a business transaction.
Please contact us anytime with
your questions regarding buying or selling a business.
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