Hard times? Now may actually be a good time to sell a business

Given the state of the financial markets and general
economy, now may seem like an unlikely time to sell a
company. But selling in the current market can actually be
less challenging than you think — and may even provide
benefits you haven’t considered.
Determining whether to sell is always a difficult and complex
decision, involving many considerations specific to your plans
and business. For example, how urgent is your exit plan and
how much do you hope to realize from the sale? Although the
current economic environment may factor into your decision,
it shouldn’t be your primary consideration.
Bad news, good news
To sell your company at a fair price, you need only one buyer
that really wants to acquire it. A global credit crunch means
that some buyers have limited financing options right now
and may not be looking for targets. That’s the bad news. The
good news is that many of the buyers shut out of the current
market are financial buyers — companies seeking
opportunistic, short-term investments — such as private
equity and hedge funds. The majority of those remaining are
strategic buyers seeking synergies and other long-term
advantages of an acquisition. These buyers may be willing
to pay more for a target that meets their specific needs.
What’s more, companies that are profitable and not highly
leveraged are regarded as attractive acquisition targets
regardless of market conditions. Stable earnings and low
risk are particularly prized in poor economies, and private companies immune to day-to-day
stock fluctuations enjoy an additional advantage.
Owners of larger companies might want to explore whether
selling their business in pieces — by division, subsidiary or
asset — rather than as a whole is a favorable option. Partial
acquisitions can be attractive to buyers who want a specific
product line, hard asset such as a production facility or
human resources such as a software development group.
Shaping up
As long as your company isn’t financially distressed and
doesn’t have significant liabilities that may necessitate
compromise, you should remain confident in its appraised
value. Several strategies, however, can help improve your
chances of selling well.
Reducing short-term debt, if at all possible, is near the top of
that list. If you have outstanding loans or upcoming loan or
bond financings, ensure that you’re current on payments.
Few buyers will be interested in assuming additional debt
from a prospective acquisition — particularly debt with
onerous rates and terms.
A current business valuation that takes into account your
company’s long-term performance is also essential. Buyers
may try to get a reduced deal price by arguing that any recent
performance declines due to a poor economy make your
business a less viable acquisition. So you need to be prepared
to show that historical earnings are solid and explain to
buyers that they provide a better forecast for future
performance.
Opportunities remain
If you put your company on the market only to encounter
unappealing bids or even deafening silence, your effort isn’t
in vain. Entertaining offers helps you understand what buyers
are looking for. What’s more, displaying your strengths can
put you on the radar of buyers that are financially
constrained now but plan to make acquisitions once
conditions improve.
With the assistance of experienced M&A advisors, you are
very likely to find a fair price for your business. Good
companies are always valuable — even in hard times.