Any businessman thinking of selling his company should start preparing one or two years in advance. This way, we have more time to improve its value, make it more attractive, interest more buyers, increase our chances of success, remove obstacles, and minimize the fiscal impact and economic consequences of the sale.
When you want to sell a house, you make improvements such as painting it, cleaning it and fixing anything that’s broken. These small touches can increase the value of the house in the eyes of the buyer. It changes its overall aspect. With a value much higher than a house, this advice rings even more true when it comes to your company.
The more attractive you make the company for the buyer, the more money you will be able to ask for and the more you will receive. Get your company into shape in order to seduce investors or buyers.
One of the main objectives of the preparation process is to identify the key aspects that need to be improved and reduce any possible risks that a potential buyer might perceive to be a problem. Below are some aspects that you should work on.
The first obstacle can be you or the other shareholders.
Before embarking on the decision to sell, keep the interests of the minority shareholders in mind. Agree the sale with them first and involve them in the process from the start.
This is the fair thing to do, given that they too are part owners. Moreover, their involvement can play a determining factor in the sale of the company.
I remember a case with a family business. There were three branches of the family on the board, all with equal shares. They had a shareholder’s pact that meant that any decision had to be agreed upon by all three.
Six months passed, a private equity firm had made an offer of 15 million. However, only one branch of the family accepted it meaning no deal. Negotiations with the firm broke down and after another six months they received a new offer. A competitor who had many synergies with the company offered 22 million. It looked like the deal would be closed given that it was a better offer than the first. However, the branch of the family who had supported the first offer was no longer interested as they were angry after having been rejected on the previous offer.
Once personal obstacles are clarified, it is time to face the company’s intrinsic obstacles. These obstacles will be faced by taking actions such as: regularizing contingencies, appointing prestigious auditors, clarifying the corporate structure, avoiding long-term commitments, reinforcing a professional and cohesive team, and defining and documenting business processes.
During a company’s sale process, you might discover that there are no possible buyers. However, there might be buyers, but they are offering less than your minimum price. In this situation you must be prepared to take your company off the market and continue operating it, creating value for one or two more years before trying to sell it again.
Written by Enrique Quemada, President of ONEtoONE Corporate Finance.