[Editor's Note 1: There is currently almost $3.5 Trillion in dry powder in Private Equity firms and Strategic Acquirers. While the last 2 years have been slow years for transactions, there is the sense that once interest rates begin to come down and there is more certainty, there will be a flood of activity as PE firms and strategics rush to deploy capital]
[Editor's Note 2: Many business owners fail to prepare their businesses for a sale either because they believe that a potential sale is far off in the future or because they are focused on current issues and do not consider preparation to be a priority. We would submit that companies need to be "prepared to be bought." Sometimes lucrative offers come unexpectedly for companies that are well-positioned. We typically recommend that a company engage an experienced investment banker to assist them in a sale - often even if they have received an offer - in order to generate a competitive environment.
Even more important, however, is for the company to be prepared.
Some business owners who have tried to "time the market" at some point off in the future have found that unpredictable events such as the Trade and Tariff uncertainty, Covid-19 pandemic, 2007-2012 recession, credit and stock market crunches, tech bust(s), 9/11, industry issues, etc. can derail their ability to sell at maximum value. We recommend to our clients to work each year to make certain that their companies are currently desirable to buyers. - DPM]
How best to position your company to be attractive to buyers:
1. Demonstrate Strong Financial Performance
* Consistent revenue growth (at least upward trend)
* Strong operating margins
* Importance of last twelve months
* Focus on hitting projected revenue and earnings numbers
* Review net profitability of customers and products
2. Maintain "clean" financials (Audited or "auditable" Financial Statements)
3. Diversify your customer & supplier base (Diversification signifies a healthy business and reduces risk)
* Buyers will pay less for companies dominated by one or two customers
* Do you have multiple suppliers for critical components/services? Have you done the work to add resilience to the supply chain?
4. Develop a Strategic Growth Plan
* Maintain a clear strategy and be able to demonstrate your history of execution
* Be able to articulate specific future growth opportunities
* Remember: A buyer needs to see a potential Return on Investment
5. Build a capable Management Team (Invest in training and key strategic hires, if needed)
6. Eliminate potential "Gotchas"(these are items that could result in significant discounts to value)
* Maintain legal documentation (licenses, regulatory filings, contracts, intellectual property, incorporation, etc.) Clear title to all assets
* Document processes and procedures
* Resolve legal disputes, environmental issues, etc. Review IT systems and security
7. Build a team of Qualified Advisors
* Minimize distractions from running your business effectively
* Get advice from professionals who have "done it before" and who have expertise in areas you do not.
* Beware of advisors that outstep their areas of expertise and pretend to do it all.
Are you and your company ready if a buyer appeared on the radar? Most business owners who have executed a successful sale of their business will tell you the most important thing is: BE PREPARED.
Selling a business is very different than operating a business. As a business owner you know your industry, your product or service, your customers and your markets. Most business owners will only sell a business once in their lifetimes - and it can be by far their most important financial transaction. ________________________________________
The Mead Consulting Group has helped clients prepare for successful sales transactions ranging from $10M to $350M in transaction value. We help companies increase the value of their businesses leading up to a transaction, minimize the things that cause potential buyers to discount the price, prepare to best position the company, and assist the owners in building a transaction team.
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What successful business owners say about us:
...We could not have completed the sale of our business without the advice and guidance of The Mead Consulting Group. Their experience was critical in helping us prepare, and endure, the transaction process to a successful outcome. ...Charles M, President, Healthcare IT Company
...A successful process is draining and stressful. The Mead Consulting Group brought the experience and expertise necessary to help our team focus on the critical issues and not get caught up in the multitude of items that can derail a transaction. Why reinvent the wheel? We chose to take advantage of individuals who could help us understand the nuances, negotiate effectively, and close the deal. ... Ken W, CEO, Behavioral Healthcare
...We missed the opportunity to sell our family business during the last upcycle. Mead Consulting helped us grow revenue and EBITDA to record levels and guided us through the selection of a transaction team. Dave Mead and his group provided great counsel throughout the sales process, removing obstacles and firmly encouraging us to a great deal with a strategic buyer that mirrored our family business values. ...Dan M, President, Building Products Company
...I do not know why anyone would attempt to sell their business without Mead Consulting. Since they have owned and sold their own businesses, they understand the challenges of continuing to run the business while trying to sell it. Their experience kept us focused on the right things and they helped keep our transaction team well-aligned during the process. They truly act as the advocate for the CEO and owner, helping to make sure that it was the best deal for the owner. ...Ron T, CEO, Software Business
For more information on the process to prepare your business for a successful transaction, please contact me at meaddp@meadconsultinggroup.com or (303)660-8135.
