September usually triggers an upsurge in corporate finance activity, including corporate sales and recapitalizations. Recognizing the favorable environment for these activities, there is a legion of investment bankers, lawyers, and accountants available and eager to assist you. But are you ready to start this significant process for you and your company?
Let’s identify several factors that you will want to address prior to starting the process:
- Get organized. Begin assembling the range of information required by your advisors (and ultimately buyers) to assess your business. Think about your business strategy and align your financial projections to communicate the opportunities for your business. Preparing in advance allows you to approach the sale in an organized manner and allows your advisors to streamline a process that maximizes value;
- Assemble your team. Selling your company requires a team and will at some point need to include your key managers. They will be essential to helping you market the company and also committing to support the buyer (particularly the private equity buyers) thereafter. Work with your advisor to understand who will need to be involved and discuss ways to communicate and create incentives that ensure they are comfortable with the process;
- Understand valuation. Embarking on a process with an overly ambitious view of the valuation will result in offers that may be disappointing and could cause you to curtail the process. Understanding factors which may negatively affect valuation in the early stages of a process allows you to proactively address these issues rather than react when raised by potential buyers;
- Address key liabilities. Most businesses face challenges that can result in perceived or actual liabilities. Addressing these issues at the outset of a process allows you to control the scope and outcome of mitigating these issues. Addressing them within the context of a transaction creates time pressure and involves outside constituencies (e.g. buyers counsel) that can expand the issue and cloud the path to resolution;
- Know what’s next. Although the potential financial rewards from a sale can be compelling, the prospective change in your role, from full-time CEO to a more limited one, may be difficult for you. Losing your identity with your company can be a daunting personal challenge. This can be further compounded if you are the leader of a legacy of generations of family ties to the company from which you are now exiting.
There are many good reasons to sell your company in this environment. As you consider whether you should embark on this path, however, take note of the factors above to incorporate into your strategic planning.
Addressing these early in your process increases your prospects for a successful transaction and minimizes the risks that accompany this important journey for you and your company.