For over 25 years Green Tree Capital has been privileged to provide merger and acquisition advice to owners and senior executives of privately owned middle market companies. In almost every instance, the sale of the company was the most important transaction undertaken by the owner.
To improve the outcome these salient issues should be addressed sooner than later.
1. Plan well in advance for the sale
It is often said, “failing to plan is planning to fail.” We couldn’t agree more. Planning for the sale of a company should commence at a minimum of two years prior to the contemplated transaction. Business owners grossly underestimate how much of a distraction the process is, often with detrimental effects on the operation of the business; it is a time consuming and complex process that requires a great deal of preparation.
2. Develop key management
Entrepreneurs tend to be control freaks. To maximize a company’s value business owners must develop people in key management positions in order to reduce the company’s dependence on the owner. In real estate acquisitions its location, location, location. In acquisitions of privately owned companies its management, management, management – so delegate responsibility!
3. Manage the company to demonstrate its true earnings capacity
Getting top dollar for their company is of paramount importance for most business owners. The best way to get the highest price is to manage the company as if it were a public company which is under constant pressure to boost shareholder value Create real value by managing the company to maximize profits as opposed to managing the company to minimize taxes.
4. Maintain good corporate records
It is absolutely essential to have well documented systems, policies, procedures, financial records, contracts, intellectual property, permits, licences, tax filings readily available to be examined to expedite the process. Prior to consummating a business transaction purchasers will engage their own professional advisors to perform a due diligence examination. In a nutshell the process seeks to confirm all material facts regarding a company.
5. Assemble a team of professional advisors
Assemble your team of professional advisors early so they can properly position the company and improve its attractiveness to prospective buyers. The team should be made up of highly experienced merger and acquisition professionals and include an attorney, accountant, financial planner, intermediary/investment banker and tax advisor. It is essential that the team be in place before negotiations commence.
6. Prepare a business plan
A business plan is the key ingredient for a successful business and is often ignored. Having a well thought out business plan will help you tell the company’s story. It will identify your market position as well as the competitive landscape and barriers to entry. It should set goals and determine if they’re being achieved. It will guide operations and measure progress. Think of a business plan is a roadmap to creating value. The White Paper Business Plans – The Essential Elements will provide further information.