While the sale of a company can be exciting and normally leads to a positive outcome, “the M&A process can be quite confounding and stressful.”
There might not be a hotter topic in the IT space today than mergers and acquisitions (M&A). The private equity world has descended upon us, and the buzz is everywhere. In 2021, global mergers and acquisition volumes have so surpassed $4.3 trillion, according to Refinitiv data. It marks a surge from a total of $3.6 trillion reached in 2020.
Earlier this year, P1 Network News hosted corporate/M&A attorney Garth Stevens, Partner with Arizona law firm Snell & Wilmer. The segment was an attendee favorite, packed with substantive advice that our partners, and all business owners, need to know when it comes to selling their businesses.
For those of you who are being asked about an exit strategy, pay attention. The decision to sell can be lifechanging, and there is much to be considered.
According to Stevens, while the sale of a company can be exciting and normally leads to a positive outcome, “the M&A process can be quite confounding and stressful.”
During the P1 Network News segment, he shared four key considerations when preparing for a potential M&A event:
- Have you set your goals and expectations?
The most important thing for someone contemplating a sale: What are your goals and expectations from a sale transaction? As a seller, you will want to be sure that your goals and expectations are aligned with reality. This is particularly important in terms of aligning your perspective on what your company is worth relative to what the market says and how you intend to be paid. Most buyers these days are private equity firms that do not pay 100% cash at closing and may expect you, as the owner, to retain a portion of ownership–and even remain employed for a period of time after the sale closes. They may also want to pay a (small) portion of the purchase price by giving you an unsecured promissory note.
- What can you be thinking about in anticipation of the sale?
First of all, if the business is owned by more than a single owner, you should work to get buy-in from all owner parties as to moving forward with a sale, or at least from those owners who comprise a majority of the company’s ownership. Second, you should do your best to get your house in order. Organize your documents and records. Update your financial records, including, if possible, having your most recent annual financial statements reviewed or even audited. If you have operational, customer or supplier issues that need fixing, get on that. The more organized and “clean” your business is going into the sale process, the easier the process will be. Buyers can lose confidence if a company targeted for acquisition is in administrative disarray, has poor financial accounting or records or has a pattern of unresolved operational problems.
- What to expect in the sale process?
A typical M&A deal takes anywhere from two months to six months from start to finish. Phase 1 is the most exciting phase, which may be viewed as the “dating phase.” During this phase, sellers are having discussions with prospective buyers and getting a sense of what a deal is going to look like. Click on Page 2 to continue reading…
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Four M&A Considerations When Selling Your Business - Channel Futures
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