As buyer interest continues to expand, more owners are taking the plunge hoping to catch the M&A elevator while it is still going up. (See earlier article on the importance of timing.)
There’s no question selling your company is very exciting. At the same time, as many first-time sellers usually discover, it can be a lengthy and sometimes taxing experience.
Be Prepared for the Extra Effort Selling Requires
In my previous life as a principal, I frequently underestimated the extra effort required to prepare for the sale — gathering information, reformatting financials, generating forecasts and answering your advisor’s questions for the Offering Memorandum. This is especially true for independents, who, generally, do not go to the expense of maintaining the detailed information many buyers require when making their valuation and buying decision.
Just as important was my under estimation of the time and energy consumed in the actual marketing process itself. This includes updating financial information throughout the process, responding to prospective buyer questions, and hosting the all-important meetings needed to generate the hoped for Indications of Interest, then Letters of Intent, followed by the due-diligence process, negotiation and signing of the Purchase Agreement, and finally, the Close and well-deserved payday.
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The Risk of “Taking Your Eyes Off the Road”
I have found you have to be especially careful during this critical marketing stage in the process. This is the time when your key players are at risk of being distracted by the extra demands involved, especially making presentations to and spending time with buyers. It’s also the time when rumors can begin to cause added distractions and anxiety among all team members.
For all these reasons it’s very easy for you and your key players to “take your eyes off the road,” when taking potential buyers for a “test-drive,” and risk ending up in ditch by underperforming. In other words, this is the time to be sure that you don’t get too focused on selling the company, instead of actually running it.
Minimizing the Risk of Going Off the Road
The best way to reduce all of these risks is to prepare as best you can before beginning the selling process. This means reading any number of excellent articles and meeting with prospective advisors who can help prepare in a way that can actually enhance the future value of your company.
And, before I receive justified protests, it’s important to say that there are many advisory firms that help you gather needed information, and who then produce expertly-designed documents to attract desirable buyers. They are also adept at finding qualified buyers and guiding you through the entire process.
In the Final Analysis it’s Your Team that Makes the Difference
At the same time, my own experience before becoming an advisor is that even large international advisory firms can’t entirely relieve you and your team of the considerable effort required during the final stages to succeed. After all, the buyer is ultimately interested in what your team knows about your business and especially its future potential.
In the end, achieving a successful exit requires a delicate balancing act. The right balance means being sure key team members are available to buyers, but remain focused on successfully running the business throughout the selling process. This also means assuring key players are secure about their future and properly incentivized.
I can testify that receiving a fair price for something you have worked hard to build is extremely satisfying, and that the current M&A market is helping owners achieve that reward. But I can also tell you from first-hand experience, that taking your eyes off the road – and having your performance go into a ditch close to the finish line– is not a recipe for achieving that well-deserved reward.
