Are you sure you’re ready to sell?

You may have decided it’s time to sell, but
before you begin the M&A process, you need to
take a good, hard look at what you plan to put
on the block. Just because you’re ready doesn’t
mean buyers will be interested — particularly if
this is the first time you’ve thought about
preparing your business for sale. Prospective
buyers won’t just scrutinize your business, but
they’ll also compare it to other opportunities in
the marketplace.
Asking tough questions
With the help of your M&A advisors, go over your
company with a fine-tooth comb,
just as a buyer will during the due
diligence stage. Evaluate
everything from debt levels to
personnel to customer
relationships and address any
issues that are likely to give
potential buyers pause, such as
too much business concentration
in only a few customers.
As an owner, you probably value
your business and its sale
prospects highly. But to understand its actual
market value, you need to think like a buyer and
ask the kinds of questions buyers will. These
include:
Is it financially sound? Is your balance sheet
strong relative to those of your competitors,
particularly when it comes to debt? Do you have
good growth prospects or has your company’s
growth plateaued? If buyers sense financial
distress or little growth opportunity, they’ll
undervalue your business or, more likely, move on.
Is it unique? Identify what gives you a leg up on
the competition. Do you make a niche product
essential to the business of other manufacturers?
Do you own a valuable patent, trademark or brand?
Do you have an exclusive client or customer list?
Such assets can increase your company’s value in
the eyes of the right buyer.
Is it an easy fit? Buyers look for businesses with
strong leaders, similar corporate cultures and the
prospect of smooth integration. Do you have an
experienced management team capable of easing
the company through a merger transition? Have
you provided incentives for good employees to
stay?

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