Here are some things to keep top of mind.
There are plenty of good reasons to consider selling your business. You may need financial liquidity for a new opportunity, or perhaps you want to pursue new opportunities with a complimentary business. You may be looking to de-risk your assets or planning your retirement. Maybe you want to take advantage of a favorable market where similar businesses are selling at major premiums because your succession plan is no longer viable.
Before you act, here are the top things to consider when contemplating this major decision:
1. Plan ahead
Even if you’re planning a sale a few years down the road, the process of preparing a business for sale doesn’t happen overnight. The process should be underway at least a year before you even begin looking for a buyer.
2. Contact a professional
Acting on impulse and handling a business sale without professional assistance is a risky strategy. You’ve poured countless hours into growing your business, so why cut corners now? To improve the return on your investment, a business advisor experienced in M&A is critical in bridging the gap between wanting to sell and closing a deal to the satisfaction of all involved.
3. Know the value of your business
Having a preliminary understanding of the value of your business is critical in your decision to sell. However, compiling the necessary information to make this assessment can be overwhelming if you don’t know where to start. Partnering with your business advisor, they will perform an in-depth analysis of the business and set reasonable price expectations based on existing market conditions and the internal condition of your company.
4. Consider a partial sell-off
You may not be planning to retire just yet – sometimes, business owners prefer to step back gradually by reducing their ownership and participation over time. A variety of private capital market solutions are available to help you with this goal. Developing a partnership with a private equity group, for example, can let you maintain a degree of control over the business while reducing ownership risk, allowing you to take some “chips off the table” and adjust life accordingly.
5. Preserve your legacy
You may be concerned about finding a buyer that will retain family employees and trusted personnel. With the future success of your business on the line, finding the right buyer can be a source of stress and uncertainty. Make sure you find a buyer who shares your philosophy and helps you devise a transition strategy that makes sense for both sides.
6. Consider a management buy-out
If the business is performing well under a quality management team, you may consider giving that team the opportunity to buy a certain amount of equity. If management doesn’t have the money available, however, you may not know how to leverage other options. A seasoned business advisor experienced in M&A can help you to source the required capital, negotiate on management’s behalf to arrive at a suitable equity position and a build a favourable incentive package going forward.
7. Find the right buyer
Owners looking to sell often don’t want their peers and market competitors to have access to sensitive corporate information. This can be a challenge since companies in the same industry may be on the list of potential buyers. Want to engage potential buyers without compromising your business, but not sure what information you should share? We can develop an effective strategy that will attract candidates and maintain appropriate discretion and confidentiality.
8. Coordinate tax and legal
Any team working on an M&A deal should include strong tax and legal representation to help navigate the sale and execute in the most tax-efficient manner and with the correct legal documentation. If you’re not used to working closely with tax and legal professionals, it can be hard to gauge whether everything is being handled properly and coordinating this can be tricky. Make sure you have the right people in place to handle this process.
9. Understand VTBs
A Vendor Take Back (VTB) is a non-cash instrument, usually an unsecured note, accepted by the sellers of a company as partial payment for the sale of their business. Generally, a VTB will bridge the price gap between the price a seller requires and what a buyer can, or will pay, in cash. You may be worried about negotiating the overall package, but a professional business advisor experienced in M&A will guide you through the process, keeping your interests and goals top of mind.
We are here to help.
Grant Thornton professionals help you through the entire sales process, from initial planning to a successful close.
We begin by working with you to articulate your goals and expectations. From there, we conduct a pricing analysis, prepare professional marketing documents, find suitable buyers, streamline the sales process and improve after-tax sale proceeds.
We can also help you make internal business improvements prior to sale, such as updating information systems, assessing the efficiency of management and employees, removing redundant assets, assembling financial records and normalizing the financials of the business.
Our commitment is to work closely with you throughout the sales process to make sure it’s managed efficiently and professionally.