Innovative guidance enables businesses to realize maximum value in an acquisition
Wien, Jan 15, 2020 - MergersCorp.com, one of the world’s leading Merger and Acquisition (M&A) advisors, today announced the release of a new 7-step plan to sell a business. This innovative guidance offers business owners a methodical and proven way to realize maximum value in an acquisition.
“Selling a business can be a brutal proposition for a business owner,” said Endrizzi Stefano CEO of the company. “Without the right guidance, you may feel that you are not getting what you deserve for a business you have spent years, or even your entire career, building. Our 7-step plan gives you a reliable process that delivers optimal results.”
As MergersCorp.com explains, part of the plan starts well before the owner is even considering selling his or her business. “You want to make the business easy to acquire, creating a turnkey operation that someone can feel confident buying.” Unfortunately, as MergersCorp.com has seen, business owners often build companies that are subjective and overly dependent on their personalities and client relationships. While profitable, this approach can be difficult to translate into a strong entity valuation in a sale. The new owners may be skeptical they can assume control of the organization.
Hiring an experienced professional is the next step. The sales process can be complex and unfamiliar for business owners. Corporate attorneys may be good at checking contracts and conducting due diligence, but they generally don’t have the specific knowledge about selling a business, especially considering the norms and nuances of particular sectors like eCommerce or retail.
The third step involves determining the value of the business. This process varies by industry and company size, but there are often “industry multipliers” that help share the value. For instance, in a given sector, the norm is for a company to be worth 5X its discretionary income or 4X EBITDA, and so forth. This does not automatically equal the acquisition price, but it’s an effective guideline. “We can often get you more than the industry standard, but the metric is a useful sanity check for assessing either a very low offer or an unrealistically high asking price.”
From there, the process requires preparation of business financials and other documentation. This work benefits from professional guidance. Seemingly minor details can affect the valuation, adjustments to the purchase price and so forth. The M&A advisor can also troubleshoot potentially problematic issues in the documentation, such as a non-cash loss reported on a tax return and so forth. The result of this step is a “Summary Book” that describes the business. It markets a company’s best features.
The due diligence process means providing all sorts of documents to the buyer. These include proof of business ownership, business licenses, payroll summaries, accounts payable and receivables summaries, loan document and so forth. Buyers want to see leases, sales contracts, insurance policies, financial statements and more. They want to understand the balance sheet in-depth. Other due diligence requirements include reports on inventories, customer lists, organization charts, team operations manuals and on and on. Employment agreements for the management or key employees are also considered critical.
Looking to sell a business? The 7-step process continues with the identification of a buyer for the business. There are many different ways to find a buyer, from hiring a broker to posting business on a popular website. It’s even possible to sell a business by marketing it to friends and family. “Each source has its own unique strengths,” the spokesperson said. “But, the best solution is to combine as many different ways to find a buyer as possible.
Then, with a buyer in hand, it’s time to negotiate a purchase agreement. This is where M&A advisors and attorneys are critical for success—and for the avoidance of negative repercussions if something goes wrong. “When a buyer discovers an undisclosed problem after the fact, there can be serious legal problems,” the spokesperson said. “We advise our clients to disclose issues upfront and deal with the fallout. It’s much better to have trouble before, rather than after the purchase agreement is signed.”
MergersCorp.com is an M&A advisory firm that arranges for the sale and purchase of businesses. The firm has a broad portfolio, but many of their clients are active in the financial industry (e.g. banks) as well as Internet businesses, wholesalers and home-based businesses.
For more information, visit www.mergerscorp.com.