A key aspect in planning for the sale of business is the way you package the information to share with a prospective buyer. To position a business for sale, it is important to clearly identify the key values drivers of the business and to mitigate the risks.
How will I know what the buyers “value drivers” are?
It is not always easy to determine what prospective buyers might have in mind when they look at a company to purchase, but having the business documents in order will allow the seller to more clearly demonstrate the company’s value once the motivation for purchase is clearly understood. By listening carefully and considering the business through the lens of the buyer’s eyes, the seller can better package the information to help facilitate the buyer’s evaluation process.
How can I mitigate risks?
Transactions that don’t make it to the Closing Table often do so when prospective acquirers identify risks that they believe cannot be adequately mitigated. These risks may be real such as undisclosed liabilities or lack of clear ownership of intellectual property. Or they may be perceived such as customer attrition or employee loyalty. Whether real or perceived, these risks must be addressed and understood.
For example, concerns related to employee loyalty may be offset by employment agreements with key employees and the creation of an environment that attracts and retains top talent.
Customer attrition may be addressed by highly documenting the business’s historical trends of customer acquisition and attrition, as well demonstration of profitable, long-term contractual relationships with the customers.
No matter what the issue, it is best if the business owner addresses a potential concern up front. A lack of disclosure could cause suspicion and potentially put the deal in jeopardy.