Whether the company is ready for sale is a question we as corporate finance advisors often get. Actually a strange question to ask a M&A advisor. If a baker is asked the question of whether his cake is tasty he won’t say no either…. But ultimately professional ethics wins out – at least with me anyway – over opportunism and I try to give the potential client an honest answer. A successful sale and therefore a satisfied customer only succeeds if the company is really ready to sell. What factors does this depend on?
What signals should be on the green for a sale of a business?
Let’s assume for a moment that it is not a more or less forced sale because the liquidity situation of the company does not allow independent continuation much longer or for personal reasons such as health reasons. If you as a shareholder can plan the timing of the sale, the following questions must be answered with a resounding yes for the ideal moment of sale:
- Are you as a shareholder no longer the person that everything revolves around, a new shareholder can use your management team or her own people to carry on the business after a good transfer?
- Are you financially sound, is your company showing stable growth and margin?
- Are the market prospects good and do the company’s products match them?
- Are no substantial investments needed?
- Is the organization in order, including financial administration, ICT, intellectual property rights and contracts with customers and suppliers?
So much for the ideal world. In practice, entrepreneurs who answer yes to all these questions usually do not want to sell at all: the company is running smoothly and entrepreneurship gives a lot of energy.
You are not ready to sell, but still want to sell….
So suppose that the answer to one or more questions is no and you as a shareholder – perhaps for this very reason – still want to sell. Especially then, good preparation of the sales process is essential.
Together with your advisors you can identify the elements that are lacking; a fresh view from an outsider can really help.
We make an analysis of the company: strengths but also risks, opportunities and threats are mapped out, for example with a quick scan analysis.
You then make a plan of action to exploit opportunities and “low hanging fruit” and to contain the risks as much as possible.
And for the concerns that remain: transparency is the magic word!
Being transparent about weaknesses is a must
Many sales processes fail because potential buyers encounter negative surprises relatively late in the sales process and then acutely lose confidence in the company. We therefore advise sellers to be open to potential buyers about possible risks or shortcomings in the company. Especially in the first phase of a sales process, there are often several interested buyers who want to move forward in the process. In this first phase of the sale, the negotiating power lies with the seller. During the process, this balance of power shifts more and more to the buyers.
Therefore, you bring bad news about the company as quickly as possible. After all, you then choose the tone yourself, can include it in the overall picture with all the plus points of the company and last-but-not-least, you create trust with the buyers instead of losing it. The chances of a successful sale of your business then increase significantly.
Is your business already sale-ready? Probably not 100%, but with the right roadmap and open communication in the process, this does not have to get in the way of a successful sale. In fact, proper preparation will make the final sales process faster and better. The investment in preparation is more than recouped in the sales process through higher proceeds and faster turnaround time.
We can help
Would you like to use a quick scan analysis to quickly identify the main areas for improvement for a sale or would you like to talk to us about preparing your company for sale? We ensure the best price for the shares as well as the smoothest possible process when selling your company.
Call Clifton Finance: Maarten Vijverberg +31 6 55853074 or Gonneke van der Lee +31 6 52466518.
By: Maarten Vijverberg