Home » OPINION » Columns » AARON EDWARDS — Business sales strategy 101: The basics

AARON EDWARDS — Business sales strategy 101: The basics

Aaron Edwards

Aaron Edwards

Y ou’ve spent years growing and developing your business and are now considering a recapitalization or exit strategy. Do you sell a portion of your business to a private equity group in order to take advantage of growth and other business/personal opportunities?  Do you sell the entire business to a management team or strategic buyer as part of your overall retirement/exit strategy?  The decision to sell is perhaps the most important business decision you will ever make, so start your planning process now.

There are many crucial points to consider in a business sale, but assuming that maximizing business value and ensuring quality of life after a deal (for you and for your employees) are the ultimate goals, there are 3 areas you should focus on now to ensure future success:

Timing — Economic conditions ebb and flow.  As such, your business growth rates rise and fall, your profit margins expand and contract, banks freely or begrudgingly lend, and investor attitudes go from bullish to bearish.  Businesses sell for top dollar when economic and business conditions are positive (as they are now), and the reverse is true when conditions are poor.  In order to maximize the value of your business, sell when economic and business conditions are positive and trending upward.  Don’t miss your window of opportunity.

Best practices and financial statement preparation — Prepare your business to be “shown-off” to potential buyers.  Buyers generally place higher values on businesses with detailed business methodologies and practices already in place, such as: reviewed or audited financial statements; written operating procedures (including quality controls, safety and risk management practices); and strategic business plans for future growth.  Understand that some of the business goals you have for running your business prior to preparing your business for a sale will need to change when your goal switches to maximizing the value of a business sale to a third party.

Assembling a team of M&A advisors — In order to achieve the best possible result and avoid the horror stories you hear about when deals go wrong, assemble your team of mergers and acquisitions (“M and A”) advisers.  At a minimum, the team should consist of your attorney, your CPA, and your M and A broker.  There are an abundance of good, high-level lawyers and CPAs in Mississippi, but only a few that are experienced with M&A transactions.  A qualified Mississippi based M and A broker can help you identify and assemble your team.  In addition, an M&A broker will market your business to a worldwide market place of financial and strategic buyersto obtain the optimal deal for you and your employees.

Today, the economy and economic outlook are positive.  Strategic and financial buyers are aggressively seeking acquisition opportunities.  It is a “seller’s market.”  Of course, that  will change at some point in the future.  Whether your plan is to perpetuate your business internally, facilitate a management buyout, or sell all or a portion of your business to a third party strategic or financial buyer, start your preparations today and enjoy the fruits of wise planning for years to come.

» Aaron Edwards is chief operating officer for  Strategic M&A Advisors in Madison.

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