Preparing for a sale: Key moves for success

by Matt Gladdish

Selling a business is a significant milestone for business owners, and it can be an emotional and complex process. Whether the owner is looking to retire, pursuing a new opportunity, or simply has a desire for liquidity, there are several key factors to consider in advance of entertaining a sale. The goal is to ensure the owner will get the best value for their business while also minimising potential risks during the sale. Here are several key moves for success when preparing to sell a business.

Understand the why

Many times, owners don’t fully contemplate their reason for selling, they just want to sell. A lack of clarity about the reasons for selling can lead to unrealistic expectations and/or the use of the wrong strategy for selling the business.

For example, the owner’s appetite for post-sale involvement can dictate the type of buyer that may be best suited to accomplish the owner’s objective. Should the owner be looking to stay involved in the business moving forward, this positions the business well for a potential private equity buyer, which often likes to see owners’ continued involvement after a sale and reinvestment from the owner. Whereas should the owner desire to exit the business completely at, or shortly after, a sale, then a strategic buyer may be better suited.

Assemble a team of professionals

Business owners should not try to sell their business on their own. The sale of a business is a complex process that demands all types of domain expertise. There are many moving parts of the process that must be managed, and which can take away the owner’s attention from running the business. Plus, significant mistakes can be avoided with experienced advisors. Establishing a team of experienced advisors upfront is vital to a smooth sale transaction process.

Key professionals to consider when establishing this team include: investment bankers, M&A attorneys, accountants, and wealth managers.

Prepare financial and legal documentation

The devil is in the details. Buyers require a detailed review of financial records and legal documents during their due diligence. Getting organised and having “all your ducks in a row” before entertaining a sale can help prevent any complications or delays during the due diligence process. For example, it’s not uncommon for founder-owned companies not to have the financial reporting processes in place which will assure GAAP-compliant financial statements. In this scenario it is best practice to undergo a quality of earnings (QoE) analysis with a reputable third-party accounting firm to establish accurate financial statements before going to market. This will help alleviate any issues during financial due diligence by getting financial statements “market ready”, and will help your advisors create a comp

Matt Gladdish supports M&A, capital raising, and corporate finance efforts at Hyde Park Capital, focusing on industrial and business services. He holds a Series 79 licence, serves on boards at GrowFL and USF, and enjoys the outdoors. He earned his BS in Finance from the University of South Florida.

M&A USA Hyde Park Capital