Does the sale process help to maximize the price of my company?
The important thing is differentiate the terms “value” and “price”. Price depends on the supply and demand at any given moment. Value, on the other hand, is given by each individual and depends on their profile and interests.
In our experience, price is usually a result of the quality of the sales process. Good preparation, well presented, clear documents, access to a good selection of candidates, proper management of confidentiality during the process and a proper negotiation of offers will maximize the price and other terms of the transaction.
The more offers a company receives the greater the probability there is of finding the best buyer because more offers means greater bargaining power.
If you comb the market in search of possible buyers and receive different indicative offers it will also be easier to discover the price range that the market is willing to pay.
As such, we are going to focus on the world of the candidates who can buy or invest in your company.
The quality of every stage of the process has a real influence on the final price. A company with an embedded value of 100 could have a poorly managed process meaning that the company is sold for 60, whereas a well-managed process could raise the selling price to 140. More than a 100% difference.
If you do end up selling your company, it is because you consider that you have either got the best possible price or at least a price that you consider acceptable under the circumstances. It is possible that, not having managed the process well, you might have inadvertently lost a lot of value.
Imagine an owner who wants to sell a company that has an embedded value of 20 million dollars. If the buyer is an expert in acquisitions and the company owner (the seller) decides to negotiate alone, without the help of an M&A advisor, it is likely that the transaction will close at 15 million dollars or less. Remember, buyers who are professionals at acquiring companies have many techniques to wear you down and confuse you in order to get a lower price.
Alternatively, if the seller decides to professionalize the sales process he will be able to sell his company for over 25 million dollars. With the help of an M&A advisor, he will prepare the company for sale, he will bring rigor and seriousness to the process through well prepared documents that highlight the most valuable angles of the company, he will look for and find buyers able to pay the most because they are the most interested and he will grow competition between them so that their offers increase. His advisor, an expert in negotiation, will take care of maximizing the price at the same time as protecting his client’s interests.
Experience has shown us that a well-managed well-worked sales process has a tremendous impact on the final price and conditions of a transaction. By selling your company you are converting years of work and effort into value and, in a short space of time, you can potentially create or destroy a lot of its value. It is in your hands.