Preparing for a Transaction – Expect the unexpected

In many cases, mid-market business owners and entrepreneurs, like you, only go through the mergers and acquisitions process once in a lifetime. It’s difficult to know what to expect from a transaction, and business owners often, unknowingly, limit their chances of achieving an ideal outcome for what will likely be the biggest deal of their lives.

Uncertainty and unpredictability are common themes for mid-market M&A transactions and unexpected developments will often occur during the process.

To help reduce the impact of such uncertainties, and to ensure they don’t derail a potential deal, there are three issues that every business owner should address before entering the deal process.

Define your Goals

The most important step to take is evaluating your motivations for pursuing a transaction. These specific motivations often determine the type of deal – and the type of partner/ acquirer – that will help you reach that goal. This step is crucial because it will define how you prepare for the transaction, and, largely, how to best structure the company for a successful sale.

Depending on your particular goal, whether retirement, business development/growth or any one of the many reasons business owners find themselves contemplating their exit options, you should carefully consider what you are trying to accomplish with a transaction. This motivation should be your ‘true north’ during the deal process, keeping you from straying too far from your desired goal.

Address Tax and Estate Issues

Implementing appropriate structural changes can radically affect the ultimate value of a sale, particularly if they are put into place many years before a transaction occurs. Since many companies retain outside accountants only for tax preparation, many mid-market business owners have never worked with anyone on transaction planning and, therefore, are not always aware of the importance of addressing such issues in this context.

Instructing an experienced M&A advisory firm that has access to a network of accountants with significant M&A experience will likely yield significant increases in post-tax value, and reduce the number of unexpected financial developments in your most important negotiation.

In addition to evaluating the company’s tax status, business owners considering a sale should also evaluate their personal options for exploiting post-tax value. There are a variety of tools that can be used to defer or eliminate tax liability, but they need to be planned for well in advance.

Hiring an Intermediary

Mid-market M&A deals are difficult to complete and numerous factors need to align to get a deal done. Ensuring you have solid advice on marketing your company for sale and support throughout the negotiation stages is crucial not just to maximising value, but also to just getting a deal done at all.

Hiring a competent M&A advisor will be one of the most important factors in reducing the uncertainty in a transaction. In the deal business, acquirers and sellers simply don’t speak the same language. Entrepreneurial owners often run valuable businesses without the sort of infrastructure or institutional experience that strategic and/ or financial buyers are used to seeing. M&A advisors can help entrepreneurs see these misalignments and suggest solutions or, alternatively, prepare the owner for the conversation.

Additionally, getting a transaction completed will take time. Selling a company can take up to 12 months, or longer, and will require many hours of work and discussion with potential acquirers. Most likely, your time is going to be much better spent running and growing your company rather than selling it. The process will be exhausting; and getting distracted from your company’s success is a dangerous risk to take.  For this reason alone, instructing an M&A advisor is vital.

Of equal significance, an M&A advisor can leverage resources for marketing a company that a business owner likely couldn’t create alone.  There is a reason private equity firms have large business development groups working work hard to generate proprietary leads – they would much prefer to acquire companies for which they are the sole potential purchaser.

If you want acquirers to compete for your company, you’ll want to retain an advisor to make that happen.

To get the ball rolling for your exit/ growth strategy, contact Benchmark International today and visit .

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