1. Don’t stop building the business.
You can’t afford to take your “eye off the ball” and must ensure the business runs as effectively as possible. Think about how you will resource the sales process.
2. Assemble your team.
Identify and select your advisory team including m&a advisor, accountant, and lawyer.
3. Get the house in order.
Be in a position to support due diligence whilst continuing to run the business:
– Accounts and filings up to date.
– Contracts in one place including; customer, partner, staff, suppliers, subcontractors, shareholders, trademarks, and patents.
– Product/technology and QA information collated and structured.
4. Business plan / information memoranda
Update your business plan as you would to attract additional capital. Prospective buyers will better understand the value of your business. Keep it brief & address both strategy & operations. Customise the plan to suit the interests of key buyers.
5. Personal issues.
Understand how the transaction may affect your professional career & personal life. Have a clear understanding of how the proceeds will be allocated. Get taxation advice early in the process.
6. Staff issues.
Think about how you will notify staff and when. Don’t advise too early or late. What does the sale transaction mean for them?
7. Build the project and communications plan.
As with all complex activities, a clear plan and excellent stakeholder communication is essential to achieving the best outcomes.
8. Timeline and decision making process:
Do you and the buyer fully understand your value to them?
Are the key decision makers covered in line with the key decision steps?
Are the proposed terms understood and acceptable?
9. Maintaining competitive tension.
To maximise value invariably there needs to be more than one buyer – so you may choose to embark on a “formal” sale process, with advisers, a formal buyer search, shortlisting, information memoranda etc. Either way, you need an intimate understanding of how your business adds value to the buyer, and of how buyer acquires.
There are many ways to value a business and a dialogue is needed to set the correct parameters. Key factors include:
• Historic financial performance, future projections, predictability of revenue streams, perceived risk, tangible assets, customer base, intangible assets (including knowhow, secrets, patents and trademarks).
• “ROI factors”. Does the acquisition present compelling “cross selling” opportunities between your products/customers and theirs? Does the acquisition allow significant costs to be removed from either organisation?
• Comparables. What “equivalent” transactions have occurred that may influence or “set” the price?
11. Agreeing terms.
You need to be familiar with the different terms and “levers” that may be used in negotiations – including scrip vs. cash, deferred settlement, earnouts, employment contracts, warranties, liabilities, exclusivity, non competes, break fees. Talk to your advisors.
12. Planning the transition.
As the seller, your ‘earn outs” will be a major motivating factor in ensuring the acquisition is successful.
Why Appoint an Advisor?
• You haven’t got the time or experience to manage the sale process.
• You have to run the business and look after its stakeholders (especially customers, partners and staff)
• They help manage the emotion in the transaction
• They can drive competitive tension whilst at the same time keeping the deal quiet
• Their experience means there is less chance you will leave money on the table
• There is a higher chance of successfully closing the deal
• They understand the nuances around due diligence and term negotiation
• They bring objectivity
Free eBooks from Tom McKaskill: Ultimate Exits – The secret behind selling entrepreneurial ventures at staggering prices, Ultimate Acquisitions – Unlock high growth potential through smart acquisitions
Reflections on Australian ICT M&A Scene – A practical guide to Mergers & Acquisitions by Lou Richard » Click for Book Order .