10 Critical Issues When Selling Your Company

As I have told our clients for over fifteen years, you never know when a buyer may contact you to make an offer to purchase your company. Below are 10 critical issues to help you become better prepared to realize the greatest wealth in your lifetime by selling your company.

At any time a company may contact you to meet the next time they are in your city. They’re vague about the reason why, but it’s a credible CEO who runs a large company, so you agree to meet. Two weeks later he or she is in your office discussing your thoughts on selling your company. This may be a once in a lifetime opportunity so it pays to be ready at all times.

Would you be ready?

Here are 10 issues to help you be better prepared to sell your company:

Get a Signed Confidentiality and Non-solicitation Agreement in Place First.
All information needs to remain confidential! And you don’t want your prospective buyer poaching customers or team members. A well drafted non-disclosure agreement (NDA) with a clear provision for non-solicitation of your staff and customers is a key protection you must have before you engage in early conversations of selling your business.

Have a Team of Advisors Ready.
Your M&A advisory team should be made up of a corporate/transaction attorney, CPA/tax advisor and a seasoned M&A advisor that will manage the entire process. CEO Advisor, Inc. acts as an M&A advisor for both buy-side and sell-side transactions and will manage and coordinate the entire sale process.  In order to maximize your sale price, run a proactive sale process to multiple prospective buyers.

Maintain Preparedness so You Are Ready for the Opportunity to Sell.
Run your company in a manner that promotes preparedness. Preparation by your M&A advisor is critical and will optimize your sale price and your ability to get a transaction completed. “Normalizing” your financials is a key part of this process. The more you have to “explain away” some part of your financials, the more your prospective buyer will start to question their accuracy. Your M&A advisor will help you with all of your preparation.

Not All Buyers are Created Equally.
Sometimes the best offer isn’t the highest dollar offer. Factor in the certainty that they will in fact close – this is key. This means gauging your prospective buyer’s commitment level, capacity to close, and track record with you and with other business dealings. Don’t be shy about qualifying your prospective buyers carefully. If you’re working with a seasoned M&A advisor or investment banker, this is something they will do for you.

Focus on Running the Business and Let Your Advisors Manage the Sale Process.
Selling your business is a strange dynamic. Emotionally, you need to remain focused and calm. Keep running the business through the closing, because if sales decline, and the trend line drops down, it could literally cost you millions of dollars of enterprise value. This is the primary reason why you want a seasoned M&A Advisor like CEO Advisor, Inc. representing you and running the sale process leaving you to focus on running your company to a great degree.

A Transaction is a Marathon Not a Sprint.
A sale process takes 6 to 9 months to occur. It can take longer depending on your level of preparation. In summary, you need to accomplish A) Preparation, B) Secure an LOI, C) Complete Due Diligence D) Complete the legal documents and E) Close. This takes a tremendous amount of experience and expertise and a seasoned team of advisors to accomplish.

Minimize Client Concentration Risk with One or Two Very Large Clients.
If you have too much concentration in a single customer, a prospective buyer may pause or ding your valuation. By focusing on mid-size and large prospects, many of your customers will tend to be larger thus avoiding client concentration risk to a buyer.

Set up a Confidential Team for the Due Diligence Process.
Working with an M&A advisor or investment banker will be critical to get the Due Diligence done. They will set up an online data room that will house the many documents on all aspects of your business. This will require your help with a high level of focus, and may require an additional team member in confidence.

Be Very Disciplined About When You Tell Your Team.
Your advisory team will carry the bulk of the load through the sale process, but you may need to solicit help from one or two members of your management team in complete confidence. Most buyers will require employment contracts with incentives to keep your key staff onboard well past the sale date. Only tell your whole company after the deal is closed – this is critical.

It’s Normal to Emotionally Detach From the Business as you Go Through the Sale Process.
Make sure you correct for that tendency to detach emotionally by keeping your focus on running the business. Again, the sale process is a marathon and not a sprint, and deal fatigue will set in. But stay focused, listen to your advisors and keep your eye on the prize.

These are 10 issues to help you more effectively navigate the sale of your company. Whether the sale occurs in the coming 6 months or 3 years, you’re now more prepared with 10 common threads to help persevere the sale process efficiently and effectively.

Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. for a no cost initial consultation at (949) 629-2520, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.

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