Considering the Sale of Your Company? Part 3- Create a team that is experienced in M&A Transactions

by | October 22, 2013

Blog written by Robert Champoux, RC Advisory Services

It is important that you form a team to assist you in the sale of your company.  This will ensure that you not only get the greatest value but will also free you up to continue to operate the company during the sale process (Buyers will capitalize on reduced performance during the sale process by trying to reduce the price).  While you may already have an attorney and a CPA, they may not have M&A transaction experience so it is important that you carefully select team members that provide appropriate advice.

  • Attorney – Seller’s attorney (experienced in M&A transactions)  Reviews and edits documents drafted by the buyer’s attorney.
  • CPA – (Experienced in M&A transactions) key team member provides tax advice relative to deal structure: “it isn’t what the selling price it, it is what you deposit in the bank after the tax man takes his share”
  • Financial Planner – In conjunction with CPA, looks at the long term needs of the seller and seeks to address some of the tradeoffs between cash up front, seller notes, etc.
  • Management consultant if needed, assists in getting the company ready for sale
  • M&A Intermediary – Manages the sale process and interfaces with the Seller, Attorneys, CPA, Financial Planner and Management Consultant.  Markets the company, locates candidate buyers, negotiates deal points, and manages the entire sale process.

Get prepared and get smart!.  Talk to your team and learn from them.  Keep a notebook and write down questions about the various terms that come up in conversations.  When a deal starts coming together it is important to be able to be a knowledgeable participant in the process.

Part IV Establish the value of the company. When considering the sale of a company (often an individual’s greatest asset), one should accurately know how much the company is worth, and not depend upon what someone else told them at a cocktail party based upon their “Multiple” of EBITDA.   The value of a company is based on a large number of factors which are specific to each company. These include some or all of the following:

Industry

Customers

Customer Concentration

Products

Product Concentration

Employees

Employee Dependency

Employee History

Competition

Competitive Threats

Government regulations

Company History

Previous legal actions

Sales level and history

Capital Equipment (Assets) and Age

Capital Equipment Replacement requirements

Adjusted EBITDA

Bank lending practices

Seasonality of earnings

Sometimes a realistic opinion of value can be derived through discussions with your M&A Intermediary in conjunction with your CPA but sometimes it is worthwhile to obtain a formal valuation from a certified professional valuation professional.  This process will not only provide an opinion of value but will provide you with the basis with which the “number” was derived as well as what changes would be required to improve the value in the future.

 

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