Four weeks ago, my blog was about What I Do. That resulted in a follow up with more detail on the topic of coaching upcoming executives. This is the second follow up on What I Do, this blog on my involvement with acquisitions and sales of businesses.
Let’s first talk about acquisitions. Sometimes existing clients ask me to help with a target company they have identified. Other times, a new client asks me to help them through the acquisition of a company, not as an addition to their existing business, but as a standalone business.
In either case, early in the process a Letter of Intent, or LOI, is presented to the targeted business owner. I help with the drafting of the LOI, usually with an attorney and the client. If the LOI is accepted, the next step is due diligence, and typically I’m involved with this process, particularly the financial aspects. Most important is my assessment of the financial feasibility of success of the business. If all goes well, I’ll be involved in the terms of the PSA (Purchase and Sale Agreement) or AAA (Asset Acquisition Agreement). And I’ll help through closing and beyond.
But more often, I’m involved in the sale of businesses. This is a natural extension of helping my clients achieve success. For most clients, their business is their biggest asset and will be the primary means of achieving their retirement goals. In the meantime, they need to grow the business’s enterprise value to support those goals. I often am involved in planning over a period as long as 20 years, depending on the age of the business owner. Increasing the value of the business over a period of a couple of decades can result in spectacular results. But it takes a very disciplined effort.
In preparation for sale of the business, the process needs to start at least two years in advance, while five years is better. There is much to do to make a business attractive to potential acquirers. I’ve been through this many times and I’m able to guide the client.
It is important to remember that there are many different values for a business, based on what type of entity the potential buyer is. For example, selling to a publicly traded company is much different compared to a private company buyer, and the value of your company in the eyes of these different buyers can vary a lot.
As in doing an acquisition, the transaction process gets serious with the solicitation of LOIs. If one is fortunate enough to have multiple offers, I can help in determining which one to select. I usually, again, get involved in due diligence, but this time in the provision of documents to the potential acquirer. And, again, I’m often involved in negotiating deal terms and the closing process.
All through this process, it is very important that the business is not neglected by the owner, resulting in revenue or profit slipping. If there is any deterioration, a downward price adjustment is sure to follow. By delegating the sale process to professionals, the business owner can tend to the business during the process, and sometimes that process can extend over quite a long period.
Perhaps the most important value I can add is the calming voice of experience. There will be times when doubt sets in or there is uncertainty about what is reasonable. I can help.
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