Tag Archives: M&A process

4 STEPS TO PREPARING YOUR COMPANY FOR ITS SALE

4 STEPS TO PREPARING YOUR COMPANY FOR ITS SALE

Creating a to-do list before selling your business can help you create an action plan before putting it on the market. When the time comes to sell your company, you have two options. You can begin the process immediately, putting it up for sale in its current state, which may mean lowering its value to potential buyers in the negotiation stage. Or, you can delay its sale until you have invested enough time to improve the way in which potential buyers see your company. This choice depends on personal motivations as well as the other objectives of the business owner.

If you choose the second option, here are the four basic steps to follow before the sale:

1.Obtain a valuation.

Surely you have an approximate value for your company in your head, but is it reliable? Getting help from professionals who are experts in this area can provide you with a figure that is objective and realistic for your company in the current market. A value analyst can also aid you in determining what the strengths and weaknesses of your company are and, thus, come up with strategies to increase its value.

2.Reduce dependency on the owner.

You believe that your business cannot function without you and your employees. By reducing this dependency, you increase its value for the buyer. In order to achieve this, it is important to plan the sale with time and patience to find the right people to put your trust in and delegate your responsibilities.

YOU MIGHT ALSO BE INTERESTED IN, “BEFORE ACCEPTING AN OFFER, STUDY THE BUYER.”

3.While strengthening your company to present it to buyers, keep your sale plans as private as possible.

Share your intentions to sell with only key personnel and external consultants only when necessary or when information is accompanied by a confidentiality agreement. Always emphasize the importance of maintaining the privacy of your sale intentions. If news that you are planning to sell your company arises, you run the risk of creating uncertainly among your employees, clients, and suppliers. This could decrease the company’s value, just when you need it to increase.

4.Develop a memorandum of sale.

Your company should be described in an easy and concise manner. When you have a memorandum of sale (also known as information memorandum) for your company, you increase the trust of the buyer and reduce diligence problems, making the way for a simpler and faster sale. This memorandum of sale should include the history of the company, industry information, a description of the company’s operations, its strengths, market strategy, and prediction for the future. The financial position and financial and operating tendencies could also be included.

At ONEtoONE, we understand that, in respect to a corporate operation, the valuation is a negotiation tool. The creation of a  value report is a fundamental part of a successful negotiation to be able to maximize the price with arguments backed with concrete and accurate numbers.

This article was written by Enrique Quemada, President of ONEtoONE Corporate Finance.

How to Find and Buy a Company

HOW TO FIND AND BUY A COMPANY

Buying a company is a long process, and in it, there are moments of intense emotions, breakdowns, and crisis, when it seems like the deal has fallen through, unable to be saved.

As M&A advisors that have participated in numerous operations know that it is a matter of tenacity – of not abandoning – of looking for creative solutions that keep the deal alive again and again until it is finally signed and closed with the satisfaction of all parties.

Who can buy a company

There are times when the opportunity knocks at your door, and if you are psychologically prepared, you can capitalize on it. But this is not usually the case. Usually, the opportunity is close to you, maybe in the very same company where you work or in a related sector, but you think that you have to create it. And other opportunities do not appear unless you look for them.

Do not rush the choosing or buying process. Be patient and work on various deals at a time. If a deal falls through, take it as a learning opportunity to make a better purchase next time.

We recommend you not to get fixated on a robot company but instead to be flexible and dig deep into the companies before rejecting them since you can be pleasantly surprised. However, at the same time, you should be proactive and define what you are looking for.

YOU MIGHT ALSO BE INTERESTED IN, “6 STEPS TO PURCHASING A BUSINESS.”

The importance of the sector when buying a company

If you have experience in a determined sector (even if you may be sick of it), we recommend that you search in this sector or those related to it. If you have experience in machinery rental, do not look for restaurant chains. This sector might not look attractive to you because there is excess capacity and because construction has suddenly fallen, but there are many other subsectors with similar characteristics that are doing well. Look for opportunities in the rental sector to which you can transfer your years’ worth of experience. Do not begin in an industry that is completely new for you because the learning curve may be very steep, and you may be taken advantage of during the purchase process.

I remember a company that we were trying to sell. A financial advisor was interested in it and made us all go crazy by asking us financial models and sensibility analysis about the future even though he was not sure about buying the business. On the other hand, the seller’s competitor saw the equipment (in this case, ships) and said, “I’ll pay 30 for it.” He sealed the deal. He understood the value of the company because he was perfectly familiar with the sector.

This article was written by Enrique Quemada, President of ONEtoONE Corporate Finance.

Buying a Company at 30 Years Old

8 Key Takeaways on Buying a Company

Last Monday, I had the pleasure of presenting a “buy your own” company workshop to the young entrepreneurs and enthusiasts of “Cercle Dynamique” in Brussels.

Just like you, some of those young men and women did while some did not have a background in economics, negotiation, or M&A. The idea was to create eight guidelines to focus on when looking to buy a company which are easily understandable for professionals as well as for complete newbies.

M&A is like marriage, you are bound for life with no option on a free divorce. Pick the right partner, and write stuff down. Here are the top 8 takeaways on buying a company:

1) Decide what you are looking for

Decide what you want in terms of location, size, industry, etc. Think about your budget as well – do you even have one?

2) Do your research

Visit companies close to home, check online, and know that there is NO harm in asking. Be careful: online, you will find one good opportunity for ten bad ones.

3) Consider getting help

Professionals will safeguard you from financial, legal, and emotional pitfalls. A sparring with a deal-making attitude will only help you move faster.

4) Understand the counterpart’s motivation

“For sale” does not mean that something is wrong; remember that. People have a variety of reasons to sell a company. What is of utmost importance is to understand why a seller sells. If you understand the motive of the counterpart, it will ease negotiations. The same goes for you – be clear about your buying motivation.

5) Complete Due Diligence

As your mom used to say: Do your homework! We mean, do the research. Team up with experts and do not leave anything up to change, be diligent.

6) Acquire the necessary funding

Funding knows many forms. You can use seller financing (vendor loan, etc.), business angels, venture capitalists, FFF’s (fools, friends and family) or just go knocking at the bank’s door. Whatever you decide to use in your financing cocktail do not overstretch and calculate an error margin.

7) Draft a sales agreement

Protect yourself with a waterproof Sales and Purchase Agreement. The SPA should define the scope of transaction, financial metrics, and formulas in detail. Once all is written down, make sure you understand and agree with every single word on that paper.

8) Keep your communication clear and transparent at all time

Communication is key in any business transaction, especially in one as important as a business purchase. Make sure all parties involved are constantly aware of what is going on.

Eager to learn more on valuation, the acquisition process and our conclusions? Check out the full slideshow here.

This article was written by Jeroen Maudens, Partner in our Brussels, Belgium office. If you would like to learn more about buying a company, take a look at the 10 MOST COMMON OBSTACLES WHEN BUYING A COMPANY.