Tag Archives: Selling your business

Steps to Selling a Business

Selling a business requires a very carefully thought out process that must be extremely well organized, and as such, this process contains a vital three-phase sequence: the preparation of the company’s documentation, the marketing of the company and ultimately, the negotiation with the buyers.

The process will usually last between 9 and 12 months, although there are frequent examples of when complications are experienced and this timeframe can expand significantly. With this in mind, there have been operations that have lasted several years, however if the process is genuinely respected and well organised, then one can go about ensuring that the timeframe will not go beyond the 9 to 12 length.

1. The Preparation of the Documentation for selling a business

In the process of preparation, there must be the creation of three significant documents:

1. A sales notebook, otherwise considered a memorandum of information, in which it presents the competitive advantages of the company, its capital structure, as well as the relevant financial projections and figures.

2. The company valuation. This document will outline the company’s value drivers, as well as additional elements that will assist negotiations in the final phase of the process.

3. An extended blind teaser of the company is also necessary in order to address and inform potential buyers about the general concepts of the company. This document, as is hinted in the name, ensures the anonymity of the company being sold until the potential buyers sign a confidentiality document called a non-disclosure agreement.

2. The marketing of the company

For this phase of the process, one must first create a mapping document of all possible worldwide buyers. As such, it is very common that the best buyer for your company is not the one that you have in mind. With this in mind, you have to consider that the buyer might not always be located domestically, or be a direct competitor of yours; taking this a step further, the buyer might not even come from the affiliated sector of your company.

For example, we once had a case of a logistics company in the pharmaceutical sector, which we did not sell to a fellow pharmaceutical company. Rather, we sold it to a company that focused on hospitals. We were able to do so because we had analyzed the corporate operations that had recently taken place in the world, and in turn, we found that there had been an instance where a transaction between a hospital and a logistics company for pharmacies had occured. This information gave us a valuable insight into the trends and thought processes that were taking place in other international markets. As a result, as we have suggested is possible, the buyer ended up being a company from a different sector.

Once the best potential buyers are found, it is time to contact the CEOs or top management of the selected company. These companise have been selected largely because they have been perceived to be the best fit for your company, and the ones that will be able to offer the highest price.

This process, which is often conducted by professional advisors, is one that can be considered to be long and laborious. However, in taking this additional time, it can be ensured that the buyer and seller are transparent with each other, share the information necessary, along with their updated perceptions and feelings toward the potential operation.

The negotiation with the buyers

Once you receive your indicative offers, this is when you begin the process of negotiation with respect to what has been offered, and how you wish to potentially adapt them. It is important to not only try find the company’s that is going to pay you the highest price, but also focus on who will be the best managerial fit for your company, as well as who will present the optimal payment method according to your needs.

As such, there are many differing elements that come together during a negotiation. Once there is an agreement with your selected buyer, this is when the official letter of intent is signed. At this point in time, the strength and significance of the negotiations get taken to a new level, as there is now a mindset that an agreement regarding a deal will arrive.

After this letter of intent, there is the necessary process of due diligence; a sometimes tedious but extremely important process that everyone should conduct before buying a company. This process sees the holistic analysis of the target company’s legal, fiscal, labor, legal, environmental and financial situation. As such, a complete analysis of the company is necessary because once acquired, any contingencies that this company may have will become the responsibility and problem of the buyer and therefore, the acquirer should try to prevent or adequately prepare for them as best as possible.

After finalising the due diligence, this leads to another negotiation process. This particular negotiation covers the likes of how to deal with contingencies, ascertaining various guarantees and finally, the revered sale and purchase agreement. However, there one cannot take the sale and purchase agreement for granted. As such, it is a process that can last up to a year and is extremely technical. Therefore, it is essential that you use experienced advisors for this phase, ones that have gone through the process many times and know exactly how to anticipate problems that are likely to arise.

Remember that the buyer will also be accompanied by very experienced advisors. As a result, especially if you are a first time seller, you should not face these experienced advisors and buyers without an experienced team that you can have absolute confidence in. With these trusty advisors on your team, you will be assured that interests will be defended and that you will be guided effectively through the process.

As is detailed, the process of selling a process is a long and extensive one. In trying to complete it alone, you risk becoming lost in the process or simply losing the motivation to get through it all. Unless you truly feel that you know how to maximise the price of your company, it is recommended that you seek out professional advisors with experience in this process. If you feel that you fall into this bracket, do not hesitate to get in touch with our team of trusty advisors.

Selling Your Family Business - Is It time?

Family Business – Is It time to sell?

Are family businesses ever actually sold? The short answer is yes, but they typically incur a cost that goes beyond a price-tag. Many family business transactions end up breaking the resistance of the family, and can resultantly cause significant internal rifts. As such, it is traits such as stubbornness and having an emotional connection to the company that often prevents one from objectively appreciating the competitive dynamics of the sector, and in many cases, generate a vicious circle that ends with the life, closing or bad sale of what was once a magnificent organization.

With this in mind, family businesses will only typically be sold when there are genuinely potent reasons for the transaction; health problems, strong discrepancies between the family members due to management, old age, urgent need for capital injection, clear technological obsolescence, a diminishing profitability or a strong process of concentration in the sector. As such, many family business owners make the mistake of delaying a necessary decision: an acquisition, a recapitalization, a merger or even a sale when there is no clear succession in the family and the manager enters the age of retirement.

The emotional difficulty of transitioning to new investors when selling your family business often causes family businesses to borrow too much, causing liquidity problems as soon as a business ncycle change occurs. This happened to thousands of family businesses during the last financial crisis, which in turn saw the end to so many family enterprises, robbing the kin of their precious family assets.

The Time to Sell Your Family Business is Now

Currently we are in a historic moment for Spain, in which we are going to experience the longest period of intergenerational transfer of private companies in history: The “Baby Boomers” have to retire. In most cases, their children or “Generation X” (those born between 1965 and 1980), have had more sophisticated education and have opted to work in large companies. Behind them come the “Millennials”, a generation that claims to be the least enterprising in recent history.

This lack of desire to be entrepreneurs by the next generations will enhance a phenomenon of concentration, making our business fabric more resistant when the next crisis comes; and rest assured, it will come.

Many entrepreneur “Baby boomers” have lived to work, have hardly developed hobbies and are faced with the vertigo of not knowing what they will do with their time when they retire. Therefore, they resist selling the company, complicating its future viability. Thus we find that 70% of family businesses do not pass on to the next generation.

Planning is Crucial

The high mortality of companies is due, among other reasons, to the lack of planning for a transition towards a competent succesor when selling your family business, the failure or exhaustion of a business or a sector, family difficulties, fights between partners, a lack of capital or a lack of financing.

Many of these closures could have been avoided if the entrepreneur knew how to choose the right time to part with their company.

In recent years, competitive pressures have accelerated the need to be quick to identify the opportune time to part with the company. Every company has an optimal time to be sold. It is vital to strive to know and be aware of it and then not regret it.

Business families must be alert to perceive the warning signs and, in case of need, know how to put the icing on a long process of creating value by way of culminating it through a magnificent sales operation. M&A consists of a long and complex process that must be approached with patience. Don’t hsitate to contact us!

Due Diligence: Working Capital & Investements

Previously, we have explored the concept of Due Diligence its importance throughout the process of buying a business. In the following article, we will explain two important aspects to analyze during this crucial phase: The concepts of working capital and other investments.

The Working Capital

We recommend that in the due diligence process that you pay special attention to the working capital (current assets and current liabilities). As such, you must compare the situation with the company’s current assets and liabilities with the two previous years and see if there are significant variations. If there are, they may be making “arrangements” to make the company appear to be worth more than what they truly are.

1- Collection days: It is a ratio that tells us the number of days that acompany takes to charge its customers. If the collection days are getting longer, you may be exposed to a payment problem. It may represent more sales and profits in the income statement, but customers in reality will not be paying as stated. Resultantly, there will remain the possibility that you will face a future liquidity problem. Moreover, the company might have increased its sales a lot, but achieving this so to be able to show a temporary increase in clientele is a rather futile and useless concept to a potential acquirer. Adding to this, if the days of collection have shortened a lot in recent months, the seller may be intentionally accelerating the collection so to increase cash levels in the short-term and in turn, increase the valuation of the company at the time of sale. If this is the case, the company you seek to acquire will be taking money that is yours away from you, and you will be left with an empty space.

2- Stocks: It is a ratio that tells us the number of days of purchases that a company has in store. If we have 60 days of stocks, everything that will sell in the next 60 days can be considered as in stock. If the stock days have lengthened in recent times, you may have a lot of obsolete material that has no outlet. If they have shortened with respect to previous years, the seller may have sold stocks in an accelerated manner so to increase cash levels in a bid to either take it for themselves, or add it to the sale price.

3- The days of payment: It is a ratio that tells us the number of days that the company takes to pay its suppliers. If the ratio is 60 days, it means that everything that has been bought during the last 60 days has yet to be paid. If paydays have shortened, suppliers may not trust the company, along with their financial situation and in turn, are being required to pay cash if they want to be sold their required goods. Another alternative is that they are mismanaging their payments (making them too soon), in which lengthening the payments out would allow an increase in cash generation. If a company lengthens the days of payment, it may mean that it is delaying payments so that there is more cash at the time of sale, so to increase its value.

If you see inconsistencies between these ratios and those of previous years, you should investigate further and look for an explanation. It is good that you also compare data from the competition (days of collection, payment and stocks) and see if there are significant discrepancies (there should not be, but if there are, you should analyze why). Companies like INFORMA or AXEXOR can provide you with the key figures of their main competitors, all based on the information that they present in the Mercantile Registry.

If you see that there are clear inconsistencies in the working capital that are affecting you, you should propose a lower purchase price that eliminates the effect of the manipulations. You are looking to buy a company with a stable working capital, not one that has been manipulated last year for sale.

If the company’s sales are seasonal, do not use the end-of-year working capital fund, instead you will have to calculate the working capital average and the debt of all the months so to have a real vision of the company. Importantly, if you buy the company when the activity and cash levels of the company are low, you will have a problem financing the growth of the balance sheet as money is needed to buy stocks and pay suppliers.

Other Investments

Another place to look for discrepancies is in investments with fixed assets (machinery). The seller may have delayed these investments so that there is more cash in the company, of which he can take for themselves before the sale. This impacts you because you will be the one who has to replace the asset that has been taken. Therefore, if you see that in the last year there was less investment in fixed assets than in previous years, look for why.

Perhaps the machinery is more obsolete than the amortization tables show and it is urgent to replace it to remain competitive. You can find yourself buying the company thinking that you do not have to invest for three years and, the day after being announced as the new owner, discover that you need to urgently make a purchase of machinery to compete.

Do not stay rely on the document presented with the results of the due diligence, review every aspect with the team responsible for analysing the company and ask them about each individual area; the toad may be hidden in one of the pages of the document and go unnoticed if the auditors do not explain it in detail.

Look for tracks that sound strange, try to find inconsistencies even if they are small and then pull the thread. All the time that you dedicate to this will help you to better understand the company and, sometimes, to avoid disappointment.

You should also investigate other issues that do not appear on the balance sheet: lawsuits against the company, contracts, credit to customers, agreements with employees for payment in undeclared money or commitments of future variable salary, etc.

If the facilities belong to the partners, look carefully at the lease paid by the company. Make sure that the results shown to you regarding rent are not represented well below the market value, which has the capacity to reduce cost levels and artificially increase the buying cost of the company.

All these inquiries that have been mentioned can be decisive for the future of a company, and it is possible that you cannot carry out a certain type of analysis without the help of an expert. If you need a guide and a reliable team with which to carry out this phase of buying a company, do not hesitate to contact us!

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Best Retirement Options for Business Owners: Selling the Company

Retirement Options: Selling the Company

To retire off the back of selling one’s company remains one of the quintessential dreams of any entrepreneur, but such an outcome does not simply arise from having a successful business. Some owners delay the process of succession until it’s too late. So, when is the right time to retire? In this article we will analyze the best retirement options for business owners, focusing on selling the company.

Many businessmen who founded their company in the 80’s find themselves stuck due to their heirs not wanting to continue on with the business, either because of their varying interests or because of family conflicts that need to be avoided. Other times, it’s the owner’s son or wife that has a conflict with company partners or the directive team and in turn, the businessman anticipates a conflict once he is due to pass the business on.

When is the right time to consider your retirement options?

Like everything in life, preparation hold’s 99% of the key to success. If the business owner observes that his family members are unfit to continue the business, the owner must be proactive in the search for a buyer.

It is a big mistake to wait for a buyer to appear. It is unlikely to happen, and when it does , it is rare that they are the best fit. More often than not, it is likely that they will bargain an undervalued price in an aggressive negotiation, all under the premise that you do not have any other alternative.

The risk that an owner takes is that as time passes, the will to continue the business wears off, and this in turn transitions into the rest of the team. This means that the business will begin to deteriorate, as the leader is becoming less interested in the project, whilst emitting less energy and enthusiasm for the company. The employees are the ones that suffer the consequences.

Why you need a plan

Just like athletes, businessmen need to know and admit to themselves when it’s time to retire. The difference here is that unlike an athlete, a business owner must have a long-term retirement and succession plan in mind, potentially several years before it is time to retire. Selling a business is a professional process that takes time, and there is nothing more important in a business’ professional’s life than that of their company’s sale.

As Saint Paul says in his letter to Timothy: “I have fought the good fight, I have finished the race, I have kept the faith.” It is crucial that a business owner prepares his retirement in such a way that he can finish selling his business in a strong condition. He will have the satisfaction that his mission was accomplished and to have placed the cherry on top off a process that creates value and ends in a magnificent operation.

Finding not just any buyer, but rather the buyer that will create the most value for your company; one that gives off the best image, adequately manages communication, classifies business by what will bring the most value and enjoys good alternatives with other possible buyers. It is crucial so that the operation has widespread and ongoing success. If you are ready to retire and need to sell your business, don’t hesitate to contact us!

10 Reasons to Sell a Business

Sectors are in constant dynamism such as new technologies (3D printing or big data), new forms of logistics and changes in the habits of consumers. These are a few examples of disruptions that cause the need to look ahead for the sale of one’s business.

A businessman must be aware of his environment, its causes and effects in respect to its business’s framework, to not be hindered. One must be ready to reinvent themselves if possible, or be ready to sell in case of an unfavorable outcome. Listed will be warning signs of when it is time to sell.

1. Concentration in the sector: mergers and acquisitions represent, in most cases, the least costly route to modify, globally, the structure of a sector. There will be a concentration of providers and competitors and your business will be left without any scale and your leeway will continue to be minimized.

2. The appearance of new economic players with greater competitive capacities that will threaten the future of your business. These players tend to be from different geographic markets or products. In these cases, selling the company while it continues to be relevant could be a wiser choice than waiting until your competitor takes over your clients and the market.

3. Declining profit, due to having little to no products that were developed or distinct. Having a scarce amount of development is a clear reason to reflect upon a sale. The business is suffering a progressive deterioration of its balance. Many times instead of creating profit one is diminishing it.

4. Growth, in some cases is precisely the problem. When a company takes on a larger size that was not foreseen, it creates a conflict with management because the company was not prepared for it. It is prefered to sell off to a larger business or one with greater management capacities.

5. The need to internationalize or relocate the business (so it can be competitive), puts the owner in a tough situation, causes the owner to sell the business before the decline becomes greater. The businessman sees how relevant competitors are relocating to different countries and he cannot do it himself.

6. The loss of human capital: if one is having trouble hiring, working together or keeping a team that is running the business, these are signs that it is time to sell your business. At this point, the owner does not have the will or strength to try and make the business grow at a rate that is of interest of other external directors.

7. The loss of important clients: this can be a sign that one is losing competitive strength or that the company is in need of new ideas or new strategies.

8. Clients are doing vertical integration: they are buying from our competitors and they stop buying from your business.

9. The need for the incorporation of new resources: if one finds themselves seeking an amplification of capital to continue to be competitive. It is possible that the businessman, especially if they are near the end of their career, is not willing to re-invest in the assets that they have already generated and extracted from the business and prefers to let go as a whole.

10. Detach from unprofitable divisions, to the ones that can no longer receive more resources, that do not fit in to the company’s competitive strategy or that needs to be sold to obtain liquidity and sustain the main business.

Upon the narrowing of margens that cause companies to be liquidated with foreign companies, that are more competitive, for cost, size or investigation capacity, development or innovation, many businesses end up needing formulas to reduce costs via productive synergies with other similar companies to obtain market cuotas sufficient enough to generate economic scales.

In the last years, the change in velocity has accelerated the need to be quick to identify the right time to detach yourself from the business. The key is in acting before it is too late. Act now and make the right decision, you may need help from experienced advisors. Don’t hesitate to contact us for a strategic advisory!

How to Sell a Business: 10 Common Mistakes

Selling a Business: 10 Common Mistakes

Those who founded their companies in the 70s and 80s are entering retirement age. In many cases, their children have chosen other paths, leaving them without a generational relay. This coincides with the current great liquidity, economic optimism and low interest rates, which is leading to many sales of companies in our country. The usual thing is that, if it is the first time that an entrepreneur sells his company, it is easy to make mistakes due to inexperience. Since selling a business is much more complex than it may seem, we would like to point out ten mistakes that many entrepreneurs make when selling. Avoiding them will not only allow them to complete the operation, but it will help them maximize their income.

10 common mistakes when selling a business

1 Do not make a firm assessment of the company

If the employer does not know what the company really is worth, because it is difficult to negotiate with rational arguments. It could be asking for an unreal price and therefore losing prospective buyers willing to pay a possible price.

Negotiating on a basis of desires and not the objective data often leads to the breakdown of negotiations. If we only look at our desires, and do not make the effort to understand the value we bring to the other side, we can hardly negotiate with quality.

2 Change interests or motivations during the sales process

A previous and serene reflection on why we sell and what we want to do after the sale is fundamental. If the employer is not clear, his own emotions can betray him and harm the operation.

The buyer may notice strange things in the owners’ attitude and this will generate concern, interpret that they are not being sincere, that they are hiding information (he doesn’t know the internal struggle of feelings) and begin to distrust the operation. It triggers their perception of risk and inevitably lowers the value assigned to the company.

3 Negotiate with a single buyer

In a negotiation with a single buyer, he always finds out that he is alone. In those cases, the buyer plays with the time and the wear and tear, thus lengthening the deadlines by requesting more and more concessions.

4 Not managing the process with confidentiality

The lack of confidentiality can cause key managers to abandon the ship and create uncertainty in the market about the future of the company. After the time different actors comment “This company must have problems because it has been on sale since time without success”, undermining the perceived value of the company.

5 Facing only the process, not hiring advisors

The sale of a company is a laborious process that consumes many hours; It requires professional advisors who have experienced this type of situation many times and know how to disable the traps that the buyer tends. Entrepreneurs must focus on improving the company’s results, while monitoring the advisors and demanding that they be informed of each step they take. Without advisers it is very difficult to maintain confidentiality and to make a rigorous search process of the best possible buyer for the company.

6 Dismissing the business during the sale

Experience has shown me that if the owner only negotiates, negotiations with buyers are often irreparably broken. There can be a situation that, at a time in the process, the seller realizes that he has made a mistake and that there is no turning back and that will harm the value. Because of this, the rope is tense in the negotiation and it evidently ends up breaking.

The result is that the owner must start a new buyer search process, which implies neglecting the company even more.

7 Find the buyer in the local area

If you look for confidentiality, this is probably not the best option. Nor is it clear that prospective national buyers are the best buyers or those to whom the company can create more value, nor the ones that can pay more for it.

BANNER: REASONS FOR SALE

8 Do not assume that there are other minority shareholders

It is fundamental that there is an alignment of all the shareholders, thus avoiding last minute surprises that lead to the fret of the operation after the costs are incurred and so much work has been developed by all parties.

It’s a mistake to think “they’ll get into the operation when I tell the minority shareholders, they sure will be happy to sell.” We need for those people to share the things that affect us because we don’t like to be taken for granted.

9 Wanting to sell in a hurry

Hastiness is very bad counselor. It greatly undermines the negotiating and search process of the best buyer. The other party notices the rush. On one hand, it will arouse mistrust, and on the other, you will give him margins to press in with demands.

10 Do not plan the process

An orderly sales process maximizes the value. The disorder causes them to lose pieces of value in each of the phases. When the disorder arises, so do the surprises for the buyer and these are always seen as elements of risk that make them lower their perceived value on the company.

Experience indicates that an unplanned sales process is much longer and, given the complexity of selling a company, the chances of failure skyrocket.

For many entrepreneurs selling a business is the most important operation of their lives, so avoiding these mistakes is of vital importance for your company and for your assets. To take the right decisions, you may need help from experienced advisors. Don’t hesitate to contact us for a strategic advisory!

CONTACT OUR TEAM

Is This the Best Time to Sell a Business?

Sell a Business: Is This the Best Time?

Many business owners are breathing easier because their companies are growing again in billing and profits. Until recently they thought of selling and resting or retiring, of moving to a less turbulent lifestyle. Now they are being to doubt. They no longer know whether to sell the business or launch themselves into an investment.

In the world of buying and selling companies, the best thing is to go against the grain. When you no longer feel like it, it’s usually the best time to do it.

The three reasons that indicate that we are in the best moment to begin the process of selling a company are:

Top moment of a bullish economic cycle. How this affects to sell a business

The most advisable thing is to sell a business at a peak moment of a bullish economic cycle. There is more abundance of money, the stock markets are at historic highs and buyers are much more optimistic. In these times of economic boom it is easier for buyers to finance themselves to acquire, either through banks or by issuing corporate data, which allows them to pay even more.

Interest rates are at historical minimums

An external element that is vital to determine the value of a company are the interest rates. If the rates are low, companies are worth more mathematically.

Interest rates have never been as low as now. Companies have never been worth so much. The rates will inevitably rise again with inflation.

Ocean of unprecedented liquidity

A radical set of policies to get out of the 2008 financial crisis has provoked an ocean of liquidity of unprecedented proportions. Money in the hands of venture capital is at record highs, central bank balance sheets are inflated and the liquidity of listed companies is causing a wave of sectoral concentration. You know your sector. If the wave has started, it will change its competitive structure and the margins will suffer more. The last ones that remain without participating in the concentration will not be able to hold on.

The sale of a company is one of the most important decisions that an entrepreneur makes in his business life. On many occasions, although he has powerful reasons to do so, he looks for excuses and arguments not to take that first step. Indecisiveness is an attitude that also has consequences.

If an entrepreneur resolves to deal with the sale or search for investors for his company, my recommendation is to not look for a buyer, but to look for the one who creates the most value for the company and its employees; according to my experience, it will most likely be a foreign group, since they will have less redundancy, it will give them more space for growth and they will appreciate the added value offered by accessing a new market.

Add Value by Finding the Right Buyer

Many business owners will sell to the first buyer without taking into account other potential options. As such, when selling your business it is important to ask specific questions. Is this really the right buyer? Will this entity pay more for the business than anyone else?

Business owners often rely on a lawyer or an auditor to look for potential buyers and investors without considering that 70% of the deal value lies in finding a suitable buyer. Hence, it is essential to find a buyer that is the best strategic fit and will pay the most for your business. To maximize the value of your company, you or the advisors must engage in a rigorous search process to find buyers or investors who can deliver the highest synergies for your business and those with the strongest financial profile.

Moreover, the best buyer is not always the closest or most obvious. The best counterpart for your company could be for example, from a different sector located on the other side of the world.

ONEtoONE insight – how we added value

Once, in ONEtoONE Corporate Finance, we advised a company that generated ten million euros each year. The company had two million euros in operating income (EBITDA) and six million in financial debt. We found a buyer in the same country (Spain) whose company earned double of what this other company earned, but had accumulated a lot of debt. This entity was interested in buying the company, offering to buy it for six times the operative income, which meant that discounting the company’s debt; the potential buyer was willing to pay six million euros for the selling company. As the potential buyer did not have enough capital up front to pay for the company, they offered to pay two million at the time of the sale and the rest of the four million over the upcoming years.

We also found a German buyer with a turnover double that of the sellings company’s, but contrary to the Spanish buyer, they did have financial capability. Given that it was an international operation and the German company did not have a presence in Spain, it offered to pay a higher price for the company. They offered to pay seven times the operating income, (that after subtracting debt, it valued the company at eight million euros) and also planned to pay for the company in deferred payments, paying six million at the start and the rest of the two million over a two year period.

We then attracted a third buyer, a Canadian company with a turnover of more than a billion euros, from which they earned a total of 100 million with no debt. The company saw many synergies with our client and at the time, they did not have any presence in Europe. They had a lot of interest in the company and offered to pay ten times the operating income of the company after subtracting the debt, which left the buying price set at fourteen million.

If we were to have sold it to the Spanish firm, the firm could have come up with excuses not to repay the remaining four million euros and could have ended up paying just two million for the company. The Canadian company paid seven times more.

Identifying the right buyer

For your company, you should look for a buyer that gives you synergies and has a lot of cash in hand, without minding so much about its location. If the buyer can perceive the true added value of your company, they will be willing to pay more for your business.

So, how can you find the best buyer who will pay the most for your company?

Around the world there are more than 120 million companies, with more than 600 risk capitals and more than 50000 Family Offices.

To start you must follow a few steps:

1. You must know what you want: In order to find the best buyer you need to know what you are looking for. You should also know the buyer and how they operate their corporations. Start with a generic search and then narrow it down into a specific search to find more concrete information.

2. Analyze and filter the results. There are many companies that can buy your company but you need to narrow it down to a single one. This can take a very long time. Start by filtering and if needed, find a company to help you with this process of analysis.

3. Get in touch with the companies. You may have to contact 200 firms or more, and it unfortunately, it will take a long time. So how do you become more efficient? If there is a search for an appropriate mediator, then the target must be analyzed. When the target is contacted there is then more speed to the process. Lastly, analyze the information being monitored by the client.

Finding not just any buyer, but rather the buyer that will create the most value for your company; one that gives off the best image, adequately manages communication, classifies business by what will bring the most value and enjoys good alternatives with other possible buyers. It is crucial so that the operation has widespread and ongoing success. If you are ready to sell your business, don’t hesitate to contact us!

Main Errors in the Sale of a Company

After talking about the opportunity to get the seller to finance your acquisition, today we discuss the three main mistakes in the sale of a company.

1. Manage Confidentiality

The first mistake is not managing confidentiality. The sale of a company has to be a confidential process in which the entrepreneur, accompanied by financial advisors, shows the company only to those who really have the interest and ability to buy the company. Therefore, you should not present your company to several intermediaries given it will be difficult to manage the confidentiality of the sale process.

What you must do is choose an advisor; only one that is to be used throughout the whole process. They will take care of confidentiality, so to ensure that the whole market will not know about the company that you are selling.

Additionally, in the event that the company not been sold, it would produce a negative perception about your client. The sales process of companies have to be fast and directed to investors that are really interested.

2. Move the Company to a Local Area

The second major error in the sale of a company is to focus the sales process to a local area. The best buyer is probably not in your country, let alone not in your area.

You have to make a broad approach. You have created a lot of value for many years and what does not make sense is to sell to the wrong person or sell the company quickly to the first buyer that shows interest.

Find the one that fits the best and has the greatest capacity within their reserve to pay for the value of your company.

3. Not Using Experienced Consultants

Do not face the process alone! The buyers will bring very experienced advisers, and you must too. Use experienced advisors: there are many pitfalls in a company’s sales process!

There was a case of a customer who was pressuring the buyer to sign the price on offer that they had already submitted, but the offer they had made was on the value of the company and not on the value of the shares. The value of the company had to be subtracted from the debt and, once the debt was subtracted, the value of the shares was very low.

If he had agreed to sign the transaction without understanding the difference between the value of the company and the value of the shares, he would have committed and placed himself in exclusivity with an inadequate buyer who had also given him a penalty clause in case he left the negotiations. As such, he would have been caught in a very complicated sale if it went ahead.

The advisors know how to help you get out of unwanted situations. Count on them, trust them and do not let the buyer fool you! On many occasions the buyer wants your advisors to not be there. He tells you that it is better not to talk to them because they make the process difficult. Ignore this suggestion, they are there to help you!

The advisors will create impediments during wrong processes, in order to help you achieve a proper process, and to ultimately protect your interests during the negotiation of the sale of the company. They know how to manage it because they are experienced and have been part of many operations.

Therefore, it is essential to use advisors who have real experience, who are not intermediaries, who are professionals in finance and corporate operations. Selling a company is a very complex aspect in which there are many elements to monitor and deal with. Do not ever put yourself in the hands of intermediaries, put yourself in the hands of advisers!

If you consider the sale of your company, and neglect the 3 main mistakes in the sales process, you will have to go through different stages to help you maximize the final price. Do you know which ones they are? Download the eBook “HOW TO MAXIMIZE THE PRICE OF YOUR COMPANY” where, in a simple way, we explain how to prepare the company for sale.

DOWNLOAD THE EBOOK

Should I sell when market consolidation occurs?

Sell my business when market consolidation occurs?

The economies of scale that other companies reach through market consolidation can make business owners realize their size is not enough to survive and ask themselves this question: Should I sell my business?

Ask yourself if there is enough business for all the competitors

Are there companies that are disappearing? Is there market consolidation? The growing interdependence of economies across the planet has accelerated cross-border M&A deals, forcing local companies to acquire the sufficient critical mass to compete against global players.

IF YOU ARE INTERESTED IN LEARNING MORE ABOUT CROSS-BORDER M&A, HAVE A LOOK AT “WHY IS THERE SO MUCH CROSS-BORDER M&A”

The entrance of larger, competitive foreign players shrinks margins and at the same time forces local companies to spend more to keep up with their research, development, and innovation capacities. To survive, many companies are forced to merge in order to reduce cost or gain enough market share to create economies of scale.

When should I sell my business

A warning sign for the business executives is when customers start to vertically integrate, buying competitors and consequently buying their products and market share.

We had a client that started to worry when he saw how the big groups of his industry were being acquired by competitors or by private equity companies. He realized that with his own resources, his company would not be able to compete against corporations with more capabilities and decided to sell before it was too late. Fortunately, we were able to ride the consolidation wave and sold the company to an American group that had to put in a high offer in order to win the auction against a Dutch group and various private equity firms.

We have seen many executives and business owners who did not notice, or chose not to notice, the signs of a consolidation in their sector. They failed to take the initiative and proactively join the M&A wave, hoping that out of nowhere the day would come when they would receive an offer. Unfortunately, that day never came, and instead these business owners lost everything.

This sad reality is especially relevant when it comes to family businesses, as 70% of them are not passed on to the next generation. The sale of a company is one of the most important decisions that a businessperson makes in both his or her business and personal lives. It takes courage not to be caught in the sector consolidation trap.