Tag Archives: Sell side

Selling a company in 2020 does not mean selling it for a reduced price

The COVID-19 crisis has affected most sectors, including the M&A. Several entrepreneurs are asking how the value of their company has changed because of the crisis. To answer this question, we have to separate those firms that have the financial capacity to survive this crisis and those who don’t. The buyers are also aware of the fact that the crisis has affected all companies and they know that there might be delays in production or difficulties to sell or receive payments. Therefore, the investors do not consider the happenings of 2020 as a base for the value of the business. Currently, the value is determined more subjectively than objectively to facilitate selling the company for a fair price.

Importance of valuation dates
First of all, the valuation date has become more important than ever before. As the crisis is has affected the market and the situation of many companies negatively, the value of most companies was not the same in 2019 December, as in 2020 March, and probably it will not be the same in 2021.

Therefore, when determining the value of the business, advisers consider the value before the crisis, and the possible value after the crisis. They treat 2020 as an exception because of the unusual circumstances, as the change in value was not the fault of the business owners, there is no need to punish them.

Price is not equal to value
It is also essential to highlight that the value and the worth of a company are not the same. The price is the exact value of the materialization of a company at the moment of the sale and depends on the offer and the demand as well. On the other hand, the value is the monetary measure of the degree of utility that the company reports to it.

Therefore, just because the current value of the company is much lower now than a year ago, does not mean that the price of sale is reduced as well. The important is to find several buyers making offers and competing for the firm, so the company can choose the best option, maximizing the value of the sale.

Risk and Profitability
Buyers make their finical decision about the company they want to buy based on the risk and the profitability of the firms. If two companies are facing the same risks, they will choose the one with higher profitability. Some of the risks that buyers have to face because of this extraordinary situation are the regulatory changes or the loss of significant contracts. Nevertheless, these risks will disappear during the year of 2021.

It is also important to mention the risks associated with the cash-flows. We cannot talk about “risk-free” rate anymore, and the unsystematic risk has to include the extra risks because of the COVID-19. Besides, advisers have to rely on the middle and long projections, which might become true, or might not. The recovery of the sector from the crisis should be considered during the valuation, as it may vary by business areas. Also, it is recommended to calculate with the possible change in consumer habits because of the crisis, as it can affect the future profitability of the companies too.

The advisors should make analysis of the expectations of the future situation of the economy and the sector, using the most information at the moment of the valuation, with a goal of providing realistic image of the company. If you want to know how risk affects investment terms, read about it in our article.

Personal Reasons for selling a company
Last but not least, the personal reasons can affect the valuation process during the COVID-19 crisis as well. The decision of selling a company evokes emotions in every entrepreneur. If the sale is forced by the external environment, which can be the crisis, an illness or other reasons, it can be even more difficult to finally decide to sell the firm. The business valuation always depends on the personal reasons of the entrepreneur. The seller might want to fasten the process because of personal issues, but it can also occur that he has unrealistic expectations which make the procedure slower. The valuation is an instrument of negotiation, and the negotiation is a dance between the rational arguments, aiming for the best possible result.

To conclude, just because we are in a crisis now, it does not mean that it cannot be the perfect moment for selling your company. It is true, that the COVID-19 crisis has affected the business valuation and the sales process of businesses as well. However, as in every other area of life, we have to adapt to the new situation instead of letting it control us. The buyers and investors are also aware of the extraordinary situation and the M&A advisors continue searching for the best buyer for the firms and they do their best to determine the most appropriate price for both parties.

ONEtoONE Company Valuation Service
Having an accurate and comprehensive company valuation is very useful as it provides detailed information on the variables that underpin a business’s value. Company valuation is needed for buyers and sellers to during the sale process. For sellers, valuation is a negotiating tool that assists in the negotiation process. On the other hand, buyers should not accept the seller’s valuation, they should do their own. Our experienced advisors can help you to determine the value of your business, or the business you are planning to buy, to gain a competitive position in the market.

About ONEtoONE
At ONEtoONE we have a broad knowledge of the Mergers and Acquisitions sector, as we have participated in more than 1000 mandates. Our company is specialized in international middle-market M&A advisory. We are continuously focusing on improving the techniques to achieve the best possible price for our clients, and we also advise on acquisitions, strategic planning and valuation. We are pleased to give our opinion about company valuation or other aspects of a possible corporate operation. If you need an advisor while buying or selling a company,
contact us.

Economic reasons to sell a company

There are many different reasons for selling a business, and each owner has his or her senses. However, the reasons can group them into three main aspects: personal, family and financial. It is usually a combination of multiple reasons, both personal and financial. At ONEtoONE Corporate Finance, we want to help you with this challenging decision. Thus, we bring you the most common reasons for selling a company. In this article, we focus on the economic part; however, if you want to know more excuses, you can download our Ebook :

The company receives an offer:

On numerous occasions, a company directly receives an offer from the buyer. Most of the time, managers doubt if it is the best option. If this happens to you, you will need good analysts to advise you. 

Need for a new injection of resources:

On many occasions, companies need an increase in resources and goods. In the times we live in, everything changes very fast, and technology is increasingly advancing. For many businesses, this condition becomes unsustainable due to the need of constant investments. On these occasions, the business owners may conclude that it is better to sell the company than to continue investing in it and continue losing money.

 

Concentration in the sector:

When a sector tends to concentrate, it is an excellent opportunity to sell a company. In this circumstance, the business that is acquired is highly succulent for the buyer and, therefore, there is more negotiation margin and possibility of profit. We are currently experiencing a trend towards concentration in almost all sectors, especially those related to technology.

Decreasing profitability:

Sometimes a business can see its margins decrease over time. The company stagnates in a medium size in which it cannot benefit from the advantages of large companies, nor the flexibility of small ones. So, the owners may be interested in selling it to another one that can bring them more size, more profits and a reduction in costs that will increase the profitability.

Current crisis:

But if there is a situation that has put the world economy in check and has led to numerous sales, it is the current Coronavirus crisis. The pandemic has dramatically affected the business environment. That is why, as our president Enrique Quemada wrote, a large number of M&A operations are taking place daily worldwide. This situation leads to a high number of companies wanting to buy others, which means that is a great opportunity for you to sell.

Whatever your motive is, the sale of a company always ends in profit, in success.

The impact of COVID-19 on business valuation – Interview with Francisco Duato, Partner of ONEtoONE Corporate Finance

Francisco Duato, Partner of ONEtoONE, interviewed for Capital & Corporate, tells what are the changes that are going to occur in the M&A sector due to the pandemic, mentioning the most affected sectors, as well as the main opportunities for investors.

The COVID-19 crisis has forced many companies to adapt to the new situation. According to Francisco, the ability for innovation and digitization make it visible which sectors can continue to be interesting for investors and which ones cannot. Although the impact of COVID-19 on the M&A sector cannot be evaluated yet, operations show falls in the price of assets, according to current data.

The impact of the crisis on valuations:

Duato first indicates that, as a consequence of the pandemic, non-essential and essential activities suffered drops that have never been seen before, negatively influencing the companies’ valuation. Besides, the advisers still do not have visibility of the evolution of prices and valuations, since all this will depend on the effect of the second wave that is beginning now and will extend into autumn.

“The entrepreneur has to do his best to preserve the value of his Company, and M&A advisors have to sharpen the imagination to transfer most of the value to the transaction price,” explains the ONEtoONE’s Partner.

The advisors’ goal is to find a reasonable and satisfactory price for the seller and the buyer as well, and in this situation after the first wave of Coronavirus, this price may vary. However, if a company’s fundamentals were good before the pandemic, and they remain so in the new scenario, this should not penalize the valuation and the company’s price.

Read more about how to value a company.

Change in deals in the M&A sector due to the pandemic

Duato comments that depending on the sector operations will fall, and others will be redefined. In affected sectors we are going to see many mergers of companies with high operating leverage.

In our Partner’s opinion, the most difficult part of the consultants’ job today is quantifying the impact of the pandemic on the different companies. As a solution, we have to focus on the strategic sense of operations rather than finances. The strategic decisions taken from now on will affect how the company gets out of this complicated situation.

Also, if we focus on making decisions about deals that had already started before the first wave of Coronavirus, it is a legal challenge. On the one hand, buyers protect themselves with Material Adverse Change (MAC) clauses, and on the other hand, sellers want to maintain the same price before the crisis.

The new situation has changed the decision-making process of investors, Duato adds. Now, when looking for opportunities, it is essential to know which sectors are of interest in this new scenario. Furthermore, not only must we take into account in which sector the company operates, but also to whom it sells.

Which sectors will see their valuations most affected?

According to Francisco, during the pandemic, large technology companies such as Amazon, Google, Apple, and Facebook have achieved outstanding results. Technology has allowed the digitization of companies and users, which has been fundamental in this crisis.

“Technology companies that know how to do well in cybersecurity, cloud services, artificial intelligence, collaborative software, internet, health or e-commerce, among others, will be clear winners, ” Duato says.

However, the tourism sector was the clear loser in this pandemic. Despite this, companies in this sector have a high potential for recovery, and because of this, experts advise keeping these assets.

Market opportunities

“The Covid-19, among other effects, has drained the liquidity of companies. In the first instance, the CFOs have focused on preserving the cash by resorting it to officially supported financing lines, but those that have survived this first challenge are facing a new one: solvency management. “, Explains Francisco

Liquidity is the ability to meet short-term payments and is related to the proper management of cash flows. However, solvency is the ability to meet long-term payments and is related to the management of the financial structure of the company.

“The approaches tend to vary greatly depending on the size of the companies. Large companies tend to know and handle the different alternatives well. However, the Spanish SME has traditionally been financed via equity, retention of profits, and bank debt. This is an ideal moment to reopen the debate on the advisability of diversifying the sources of financing and evaluating the options available in the market based on the specific characteristics of each company. It is time to overcome the fears of opening the shareholding to investors such as private equity, which in addition to financing, provides professionalization and support in management,” reflects Francisco.

On the other hand, our Partner comments on his opinion on the role of M&A in current and future times: “As we know, seeing changes in M&A takes time and is not usually the best option when immediate problems have to be solved.” However, he indicates, “not making all these reflections on time can lead companies to situations in which the only option is to turn to opportunistic investors. With this comment I do not want to discredit the work of the funds with a distress profile, they are a good option when we are facing a special or very deteriorated situation, but avoiding reaching that point and trying to maneuver in time is a shared responsibility of the entire management team.”

At ONEtoONE Corporate Finance we have created a podcast solving the most common doubts about our company valuation service.

About ONEtoONE

If you are looking to optimize the value of your investment within an operation, I encourage you to evaluate ONEtoONE Corporate Finance: a firm dedicated to provided the highest value services to their clients through transparency and professionalism. For more information click the button below.

Whether Buying or Selling a Company: Pick the Right Advisor

Pick the Right M&A advisor By PAUL HAGER,  Partner of ONEtoONE Corporate Finance


Have you bought, or sold, a business lately?  If you did, how do you know if you received optimal value on the deal? Did you ask an M&A advisor? It can take years before the value gained can be objectively measured, or even whether the result was a business success. Recent McKinsey and Harvard research shows that nearly 90% of all M&A deals fail to deliver the value expected, or achieve their M&A goals.  How can this be?

Well-known, high-profile deals like Daimler-Benz-Chrysler; Time Warner-AOL; Quaker Oats-Snapple; Sears-Kmart; Google-Motorola; Sprint-Nextel, are extreme examples of deals not meeting expectations.  A number of factors lead to poor M&A results.  These include: simply paying too much; fundamental cultural mismatch; massive infrastructure incompatibilities; significant redundancies; or no product synergy, whatsoever (i.e., the marriage simply wasn’t ever going to generate products customers would consider more valuable).

As someone who has bought companies as a Fortune 500 investment committee member, and as a valuation and investment advisor for M&A clients, I’ve found the team you select to be your investment advisor plays a significant role in the amount of value created in the deal.  I hope my thoughts might help you pick the right investment advisor, and significantly increase the likelihood of you achieving your M&A goals.  I’ve listed characteristics I think exist in all exceptional advisors.   An exceptional investment advisor:

1) Asks “Why?”.

You’ve likely heard of Simon Sinek’s Golden Circle paradigm or Paul Ambruso’s use of the “5 Whys” to discern the root cause of success and failure.  The “5 Why” approach was derived from Taiichi Ohno’s 1960s Toyota Production System methodology.  Its purpose is to identify inefficiencies, waste, inconsistencies in manufacturing.  Most importantly, the technique can help people discover and objectively assess assumptions, biases, facts, priorities of any endeavor – personal or professional.  In our case, buying or selling a business.  The “5 Why” method states that clear insight leads to the best decision, and that insight is likely to come only after you’ve assessed answers to five iterations of “Why?”.  For example, your investment advisor might ask, “Why do you want to buy a business?, Why do you think buying another company will lead to greater innovation?, Why do you think this type of research capability will lead to needed innovation?  And, so on.  Asking “Why” throughout the M&A process leads to clearer understanding of why a certain type of company or investors would be the best match.  An exceptional advisor asks “Why” to constantly validate assumptions, eliminate wasted effort, explore new deal options, and sustain deal focus.

2) Understands your business

As an M&A advisor, there is no adequate substitute for deep understanding of a client’s operations and industry sector.  Having empirical insight into current and future industry trends, enabling technologies, and inter-dependent industries dramatically heightens the value ceiling.  An exceptional investment advisor will use this insight, and that of her other industry experts, to develop a set of optimal investment candidates for each client.

3) Spearfishes

Last year, a friend of mine told me of her exciting trip to Bora Bora (How nice is that?)  She said the restaurant would take their dinner order the day before, so that snorkelers could search for the exact type and number of fish needed for their guests’ dinners.   No waste in effort, time, or resources (fish not on the menu appreciated that).  The diver knew the depth and location to find the type and size of desired fish.  An exceptional investment advisor will find those investors and companies that most value a specific client’s offering.  Through use of the “5 Whys” and other analytic methods (e.g., Porter’s 5 Forces) to build a well-defined target profile, the advisor will quickly identify superior matches for each client.

4) Leverages global reach and local insight

In searching for their client’s best investment candidates, it is sometimes more efficient and expeditious for advisors to contact corporate, institutional, and private investors with whom they regularly do business – “the usual suspects.”  Because of established trust and understanding regarding these investors’ preferences and capabilities, advisors will work within their established networks.  That’s understandable.  But, the best strategic partner, the one that may most value the client’s offering is often not within any investor’s direct set of contacts.  The best advisor is one who will leverage an expansive global investor network that connects multiple industries.  Investors who most value your offering may be in Singapore, Prague, Estonia, or Shanghai.  An exceptional investment advisor will leverage access to trusted M&A colleagues with deep understanding of financial markets, industries, and companies in each region of the world – allowing them to open discussions with new investors and corporate networks that promise to hold greatest interest in the deal.

5) Takes business, personally

If the human body is 60% water, I surmise at least 60% of a company’s value is its people.  Or maybe, applying the Pareto Principal, 80% of a corporation’s value is its people.  A good investment advisor is constantly mindful that M&A success depends on people to embrace and support implementation – before and after the deal.  Having been an entrepreneur, and having worked to grow small businesses for nearly twenty years, finding a phenomenal, successful M&A match helps to improve the lives of people in each company.  Or, it should.  Cultural rifts and redundancy layoffs can destroy the deal, its value, and peoples’ lives.  Applying the previous four facets helps create and expand deal value.  An exceptional investment advisor knows that business is personal, and that the company’s greatest value asset must be supported, nurtured, and challenged.  A successful M&A deal will do that.

There are many exemplary investment banks and advisory groups around the world.  Whether it be a top-tier large firm, or one with a boutique focus, these firms have phenomenal analytic research, and deal-making talent.  I know this from my own experience.

My only suggestion is that you chose an investment advisor who also possesses the five qualities mentioned above.  If you do, I am confident you’ll capture exceptional value in your deal.

If you are looking to optimize the value of your investment within an operation, I encourage you to evaluate ONEtoONE Corporate Finance: a firm dedicated to provided the highest value services to their clients through transparency and professionalism. For more information click the button below.

Who is your target customer?

How to identify your target customer? You must choose which type of customers you want to serve. Wishing to help everyone is a mistake, just like it would be to cover all the needs in your customer segment, or trying to imitate every new idea. Many companies are living a “herding behavior,” following the leader´s steps and comfortable in vulgarity.

Reflect on which customer segment your company has the more potential to create a unique offer that covers a type of unattended need. Once discovered, be willing to renounce on the other types of customers that don´t have such a need for that service.

Insurance company Progressive discovered a poorly-served collective. Those with alcohol abuse or risk behavior history had great difficulty in being accepted by insurance companies. They tackled this collective, which had few alternatives, and which, in turn, allowed them to charge higher premiums. Thanks to their ability to handle information, they were able to identify segments within this collection that didn’t pose such risk, like drivers with drinking history but also parents with small kids. 

To add real value, you must step in the customers´ shoes and understand their behavior. Try to understand the psychological reasons behind their purchases. You must feel how they feel. Don’t project your feelings to the market. Think about their concerns, needs, preferences, thoughts, hopes, relationships, and daily routines. For this, it’s essential to see them in action:

  • How are your customers?
  • What are their personalities like?
  • Whom do they identify with?
  • What are their hopes?
  • How do they see themselves?

Try to think as customers do. Don’t focus only on the features of the product or service, but on the benefit to the customers, on how they perceive it, on the psychological value. What do customers really value? What touches their core?

Customers buy solutions

See your customers as strategic assets and innovate around them, not around your products or services. Instead of thinking about the product used by the customers, think about the problems they have to address. Customers don´t buy a drill, they buy a hole. They don´t buy a service, but a solution.

It requires empathy to understand the feelings of a type of user and their frustrations. That’s why many business models have been born out of users’ frustrations.

Dropbox Case Study

Dropbox is an example. It was founded in April 2007 by Drew Houston, a 27-year-old man. The idea came to him while on a bus when he realized he had forgotten his pen drive. He decided to program service for synchronizing and sharing files between computers on the Internet. This way, he could always have access to the latest version of documents.

Every job has a functional, emotional, and social dimension.  You must decide who will and who won’t be your customers. Ask yourself: ç

  • Who are my direct customers?
  • Who are my final customers?
  • What issues do they have?
  • What can I do to address these issues?
  • How do these customers use existing products to satisfy their needs?
  • What can make me different in a way that makes these customers interested?

Making customers your fans 

After knowing who is your target customer, you have to make them your fans, you must give an overabundance of the feature they value the most. Focus your efforts on attracting and engaging fans – those who can be most interested and most loyal. They will help you spread the message among their peers. Turn them into your army. 

It´s about closing the space between problem and solution, between what is and what could be, between the existing experience for users and the one they could have. But be careful, you must solve real problems, not ones created by you. 

Maybe you can create a new class of customers that didn´t exist before like FedEx did when they developed a new market for those who wanted their packages to arrive in just one day, guaranteed. 

Net jets found that business travelers had two options in two extremes, either they traveled on a commercial plane, enduring all the discomforts of an airport, or they had a corporate aircraft, with the enormous costs this implied. They understood that there could be a middle-ground formula, allowing executives to rent a private plane whenever they needed it. 

After analyzing what the customers want and your capabilities, you must look at competitors and alternatives to see if there is something that will make you different in the eyes of those customers.

Naturally, the strategy is to satisfy the customer and gain a profit while doing so, that´s why you must ask yourself if the customer is willing to pay the price you have to charge for it to be profitable for the company. Thus, it’s about creating value for your customers and being capable of capturing value for yourself as well.

Next steps after knowing who your target customer is

Knowing who is your target customer is vital, and that is a great first step. Though, you must think that the strategic management of a company has many other areas that business owners must pay attention too as well.

It is about a collective approach towards dominating all the areas of your company through the right strategy, depending on your goals, industry, and many other factors.

Our CEO has written an excellent book that will help you get a glance and overview of how to achieve this. Fill out the quick form and download it today.

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How to build  a more profitable company through the FIT strategy and may other elements.

Discover the eight elements of the business puzzle, and all they contain, to build a valuable company.

Learn how to execute your strategy and maximize the price of your company as never before.

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Entrepreneurs are our heroes

Many entrepreneurs wage daily battles, spend endless sleepless nights, feel misunderstood by their employees and their close ones.

Entrepreneurs are often considered lucky, with many disregarding the financial risks they assume, the continued loneliness they experience, the hard decisions they must take, the emotional struggles, and the general cost of following their passion, knowing that in a moment they can lose it all.

An entrepreneur in his 40’s started having severe panic attacks; he visited a doctor after an attack that forced him to stop his car and walk home. The doctor recommended he take a leave of absence, but his company needed him, and he kept on pushing until the anxiety medication kicked in. He knew this was not sustainable, so he hired us to sell the business. We got him a high valuation from a Private Equity that was consolidating the space, and he was able to walk away after the closing with enough money to retire and not stress anymore.

Employees can get to go home and forget about work, most of his friends go on vacation and don’t have to think about work, but that is not an option for him.

“For an entrepreneur disconnecting is not an option”

He can never forget about work and worries. Decisions are always in his mind; the phone rings all day every day, and emails don’t ever stop, he wants to disconnect and relax, but the reality is that he can’t.

Therefore, it can be one of the different reasons that motivates an entrepreneur to sell a business.

How can entrepreneurs make his effort worth it:

A good strategy is the best friend of an entrepreneur. Knowing how to manage your business will bring you two important things:

  1. Al though worries and work won’t stop at least, the entrepreneur will gain a sense of direction, control, and progress once he manages to dominate all the areas of his company. Resulting in a feeling of satisfaction that will reduce the personal impacts all the sacrifices are causing.
  2. A good strategy leads to higher benefits and value. In other words, it leads to the supreme objective of any entrepreneur: to see their business grow.

If you are in this, you have to go big. Your efforts have to pay out your sacrifices, and your success has to be your relief. Please, download this book written by our Chairman, Enrique Quemada, and learn the whole scope on how to manage your business to success strategically. 

Download for free the bestselling book: “FIT: STRATEGY, VALUE, AND PRICE”

Please fill out the form and enjoy the book written by our Chairman, Enrique Quemada

How to build  a more profitable company through the FIT strategy and may other elements.

Discover the eight elements of the business puzzle, and all they contain, to build a valuable company.

Learn how to execute your strategy and maximize the price of your company as never before.

BOOK


We will keep you informed of the latest news

reasons to sell a business

Reasons to sell a business

The professional life of a business owner is made up of different stages that are constantly being overcome. The question is: which is the last stage that the business owner should reach? Usually, this happens when the following conditions come together:

  • Having reached professional and economic success.
  • Being relatively close to retirement.
  • Feeling dissatisfied and unhappy towards your business or work.

When these patterns come together, we are clearly in front of a situation that requires a change in the focus of life. This means that probably the original purpose from which the company was created has already being achieved, and hence its value has been lost. This is when the moment of considering a new life purpose, that goes in accordance with the current situation of the businessman, arrives. At this point, many reasons to sell a business may start to appear in the mind of a business owner.

selling process of a company

Two main reasons to sell a business

Working in our sector, we have witnessed wonderful stories of different business owners that have explained to us the main motives why they were selling their company. Usually, there are two types of reasons, economic and personal. Maybe you can relate to some of them. Let’s take a look:

Economic reasons:

  • A new competitor: We have seen many cases in which, within a sector, big corporations were acquired by strong venture capital institutions. This may be a scary trend for business owners that compete against such organizations, since they have less resources to stay in line. Therefore, this situation gives them a good reason to sell their business.
  • Decreasing profitability: This is always a strong sign for selling a business. In some cases, we have witnessed that the aggressive competition in the industry threatens companies that are not well structured internally. Therefore, they become less profitable with time. Don’t let his happen and read the signs, you might still be on time.
  • Need of capital injection: We live in extremely fast advancing times. For some businesses, it’s hard to adapt to the evolution of the industries, since this requires a huge investment. Competition may evolve faster and put your business in danger. The need of capital is a good reason to consider selling your business.

Personal reasons:

  • Retirement: This is one of the most common reasons for a business owner to sell their company. Many owners have gone through a long path to build their company from scratch. It is hence normal for a business owner that has reached professional maturity, to feel tired and in desire of some peace and quiet at last.
  • Change of lifestyle: This motive goes in hand with retirement. Business owners usually seek fulfillment in other aspects of life once they reach professional maturity. Some want to dedicate themselves to giving back to society, others want to spend time with their family, and others simply want to enjoy the perks of a good life.
  • Health Conditions: Owning a business is extremely stressful and requires the person to be in an optimal state of health. Sometimes, nature denies this privilege and selling the business may be the best option to avoid losing all the effort and investment of a lifetime.

These are some of the main reasons to sell a business, but the important question is: how would the business owner feel after the sale?

 

The after-taste

After selling the business, many business owners stop experiencing the sensation of dissatisfaction and unhappiness. They are able to make a decision that allows them to confront a new professional challenge. Moreover, they can choose to do something that contributes to society and their loved ones.

Despite this, many business owners fear to finish their professional stage. It is common that they have uncertainty about what might happen after the sale. However, once the company has been sold, the businessman enters a new phase in his life full of freedom. Now that they have complete control of their time and resources, they can focus on their life, new objectives, and even dreams.

Moreover, the predominant sensation is of pride and satisfaction thanks to a good company valuation and a successful sale. The business owner sees how the efforts and hard work are recognized and will continue to deliver results for many years to come.

Having said that, if you need further information about the selling process of a company, we put at your disposal our team of highly qualified advisors. When there are more than a few reasons to sell a business it’s time to ask yourself “the” question.

m&a advisors
barreras para la venta de una empresa

Principal barriers of selling a business

Which are the principal barriers of selling a business? Do you know how to deal with them? The matter at stake is a complex process that requires the assistance of a consultant service that provides trust, transparency, and confidentiality to the business owner.

These are the three principal barriers for selling a business:

  • Dealing with confidentiality.
  • Giving trust to the advisor figure.
  • Knowing how to find the best buyer.

Dealing with confidentiality

The desire of selling a business comes from a variety of reasons. For example, wanting to embrace a new adventure, feeling that you have “already done it all” or the tiredness of a long professional journey.

When protecting the confidentiality of selling a business we always have to understand the importance of leaving aside personal interests in communicating this decision, since these can affect business development.

It is of vital importance to know how to manage the following aspects of confidentiality when selling a business:

Confidentiality in the internal atmosphere of the business owner:

Many owners make the mistake of communicating this decision to their internal staff too soon and without the necessary cares. When this happens the probabilities of losing competitive strength increases, talented employees notice a lack of leadership and look for other professional exits and the snowball begins to grow to the point that a great business may fall apart.

Because of this, it is vital that the owner communicates this to the precise people in the correct moment. Also, a positive and good attitude should be maintained within the company, independently if the selling of the business will happen or not. This way, employees will be consistent with their good work and the rentability of the company will not be damaged.

Confidentiality in the external atmosphere of the business owner:

One of the greatest fears an owner has when thinking about selling his business is that they see their competitors as the only possible buyer of their company thanks to a lack of knowledge and information. Owners do not know about the techniques of how to manage confidentiality or strategies that allow them to find other buyers aside from their competitors. As a result, owners are paralyzed because of fear and they let pass what can be a good selling opportunity.

Lets take into account that the process of selling a business begins the moment the business owner first thinks about it. To avoid making these mistakes it is vital the support and guidance of a professional consultancy service that provides a high level of transparency and trust.

Confidentiality is just one of the principal barriers of selling a business. The owner also must know how to work with a team of advisors that are well qualified, have experience and can land a successful operation.

Giving trust to the advisor figure

There are many types of advisors out there who can be presented to the owner as facilitators, brokers, consultants, auditors etc. In most cases these so called “advisors” do not maintain an adjusted profile and that is the reason many operations do not succeed. This process requires and demands the advisor to manage techniques and knowledge that only professional M&A advisors know.

Therefore, when you think in advisors, you must seek for those whose professional nature is adjusted to what you are trying to do, in this case selling a business.

Either way, to avoid working with a pirate advisor or someone that doesn’t have the capabilities to carry out a corporate operation, listen to different financial advisors and then check out their success history in similar operations. Remember that correct guidance leads to a successful sale.

Therefore, it is important to let yourself be guided by the right advisors so you can also find the ideal buyer for your business.

Knowing how to find the best buyer for your business

The search for the best buyer and a good negotiation are key elements for a successful sell that reflects the hard work of the business owner. Not only should you find a solid offer, but also a buyer that transmits confidence and tranquility to the business owner.

This is why it is important not to make the mistake of selling the business to the first company or investor that makes an offer. The business owner should not make the decision without a previous in depth search and a good analysis of all the possible offers and opportunities.

In many occassions, finding the ideal buyer for a company can result in a long and exhausting process. For this reason, it is important to answer the following questions:

  • Which are the different types of buyers?
  • How to know if a company might be of interest for a buyer?
  • Which are the methods for finding ideal buyers?

We invite you to know more about this area in the following article.

selling process of a company

Overcoming the principal barriers of selling a business

Thanks to the complexity of this process, the importance of what is at stake and the dynamics that a corporative operation demands, our recomendation is to continue this process by the hand of expert advisors with enough experience and history that can help you overcome these barriers. If you are interested in selling your business contact us and we will help you.

If you have any questions contact us.

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after the sale

After the sale

What comes after the sale? Most companies are born from a dream and when that dream is fulfilled another one is born. Therefore, after enjoying professional success and having conquered the business world, what will that new life focus be?

If we keep climbing the mountain that has already been conquered, then we fall in the hands of inertia and redundancy. That’s why the business owner needs to think about a new mountain to climb, one which is not build on success, but on sense.

It is normal that any professional that comes close to maturity feel the need to give back to the world what he has received. It is here when he understands that we only live once, and that true happiness is found in giving. This translates in leaving a legacy.

What does leaving a legacy after the sale means? 

After the sale of a business we have to think about living for the wellbeing of others and not for ourselves. It consists of being thankful for the privileges you had and change the focus of your life objective. In this case, an objective that is defined by the number of lives impacted, instead of the size of the bank account.

When the business owner reaches economic success, he discovers that there are two sources of unhappiness in life:

  • Not getting what he wants
  • Getting what he wants

He undesrtands that it is not enough having a prosperous life, but it should be productive by generating good for others. He gets that he has lived for efficiency: doing things right; but he has not been effective: doing the right things.

When the answer to the next questions are not fulfilling, it is when the owner realizes that something must change:

  • With what amount of profit will I be happy?
  • Will I keep on moving forward with the same old objective and never reach and end? Or should I explore new opportunities?
  • Have I become a prisoner of my own success and business?

This is when the owner begins to dream with having more control over his life. He sees that he has the experience and tools to produce a positive impact that goes beyond his salary and dedicates himself to improve the life of others.

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Here is when a new adventure begins, and the first step is to sell the business. The investment that will be done now will not be to generate more wealth, but to give to a bigger purpose. It is the beginning of a new dream, an opportunity to channel energy and resources towards a goal that supports others. With this in mind, the owners reach freedom to choose what he wants to do with his life, which results in an unimaginable level of happiness.

selling process of a company

Clearly there is something more in life than just business. A lot of businessmen should ask themselves: What is my true purpose? What do I want to be remembered for?
Our success will be empty until we add meaning to it. It is about a change of heart, perspective, and priorities.
Have in mind that you are not what you want to be, but you are what you do. If you are unhappy, decide and act now, we only live once.

*Source of article www.expansion.com/blogs/quemada/2019/11/22/del-exito-al-sentido.html  By:  Enrique Quemada

*Music of video: https://www.bensound.com

If you have any questions do not hesitate in contacting us

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como vender mi empresa

The selling process of a company

Many business owners reaching the end of their professional career should get familiar with the selling process of a company. Without a doubt, this is a complex process that has to be dealt with extreme care and attention in order to protect the main interest of the business owner: selling the company at a fair price.

Taking into account that all the phases of a corporate operation are highly important, in the following article we will analyze the most delicate points present during this process. This way, you will be more prepared for when you consider selling your business. These points are the following:

  • Know how to value your company to set a fair selling price
  • Find the ideal buyer for your company
  • Understand the due-diligence process
  • Understand the structure and functions of an SPA

How to value your company and why it is important

Maybe you never thought about how to value your company because you were not aware about the importance this factor has in the M&A world. Nevertheless, knowing the value of your company is vital for a successful sale.

A lot of business owners ignore the importance of making an in-depth valuation analysis, this is essential not only for a good sale but also so that we can apply improvements within the company and upgrade its performance.  Generally, what we believe a company is worth differs with what it is really worth.

The valuation of a company is a technical analysis that requires a deep and fundamental financial know-how. The first step is to determine the characteristics and factors that provide value to your company so an educated guess can be made. If you want to know more click here.

To sum-up, knowing how to value your company is ideal for: 

  • Preparing a good negotiation and being able to maximize the price of the company.
  • Finding a middle ground between the two parts as the views of the buyer and the seller tend to differ on the value of the company.
  • Understanding the position of the company in the market compared to competitors.

It is an important first step for starting a corporate operation in the right way. If you want to read more on the topic go to our article “How to value a company? The usefulness of the business valuation process”.

selling process of a company

How to find the perfect buyer for your company?

It is important to know how to value your company, but also finding an ideal buyer for it. You need to find a solid offer as well as a buyer that will transmit confidence and tranquility to the business owner. And this is no easy task.

The search of the perfect buyer and a good negotiation are key elements for a successful sell that reflects the hard work of the business owner. That is why it is important, first, to avoid falling in the mistake of selling the company to the first counterpart that makes an offer, and secondly, to know how to identify a good alternative.

To be successful  in this step of the process it is necessary to answer three questions:

  • Which are the different types of buyers?
  • How to know if a company might be of interest for a buyer?
  • What are the research methods for finding ideal buyers?

The question is: How? This general overview can help.

Types of buyers:

Knowing the profile of the businessperson or entity that is willing to buy your company is key. The 6 main types of buyers are the following:

  • Suppliers
  • Current clients
  • Foreign companies
  • Venture capital
  • Competitors
  • Companies from other sector

Analyze or identify what type of buyer is suitable for you is not easy, therefore it is important to know the different interests each buyer has and if your company matches them. Due to this, it is important you are aware of the following matters:

  • Knowing the trends in the sector and the participation of the buyer in it.
  • Knowing the distribution of the different business lines of the potential buyer.
  • Knowing the strengths, weaknesses, opportunities and threats of the potential buyer.

However, how can we answer these questions? We recommend you to apply the following tools:

  • SWOT Analysis, it will help you understand the strengths, weaknesses, opportunities and threats of the sector, your company and the company of the buyer.
  • Porter Five Forces, will help you know if the sector of your company seems attractive for a certain type of buyer.
  • Boston Boxes, they are useful to analyze the business portfolio equilibrium of a buyer and identify why your company could add something valuable to a specific buyer.

Nonetheless, this step does not end here. It is extremely important to know how to use the different methods that will make you able to identify the perfect offer and negotiate a benefitial transaction for both parts.

The next thing we will do is understand  one of the most delicate concepts inside a corporate operation: the due diligence.

The due diligence

One of the main points during the selling process of a company is the due diligence. During this phase, the level of transparency and precission from the seller should be extremely high, as it is here where the buyer will be able to see in depth and full detail the company he is about to acquire.

It is a crucial step where all the process can collapse or keep on going. This is why it is of extreme relevance to know how to manage this step.

In other words, the due diligence is an analysis of everything that is under the tip of the iceberg of the company to be acquired. Due to its level of delicacy, we recommend you to manage it with extreme caution, and if possible with the support of a professional advisor.

You would think that after the test of the due diligence the process would be over, but there is still left one of the key parts of the process: the sale and purchase agreement (SPA).

The sale and purchase agreement (SPA)

Once the buyer determines the real value of the company that will be acquired and the due diligence is finished, it is time to decide the selling price and prepare the sale and purchase agreement (SPA) of the company. This requires of a lot of care and meticulousness.

One simple paragraph can make a successful operation become a failed one. With this in mind, the SPA is not something to take lightly due to its complexity. The most frequent question is: what is the content of the agreement?

Generally the agreement is made up of 5 sections:

  • Description of the transaction
  • Terms of the agreement
  • Representations and guarantees
  • Limited responsability
  • Conditions of the agreement

Each of these sections have a high level of importance and they should be perfectly executed to assure a successful operation. We invite you to know more about them in the following article.

How to sell a business: a real life example

Knowing how to sell a business can be complicated, that is why we want to clear all the doubts you may have regarding the selling process of a business so you can focus on taking the best decision for your future and the one of your company. We wanted to take the opportunity to tell you with full details the acquirement of SumaCRM by Efficy. You might be wondering what is unique about this operation, and the truth is the story behind it is really special, as from the blog of SumaCRM they retransmited weekly the whole selling process with real data and full detail.

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