Selling Your Business: The Blueprint for a Successful Transition
Matt Goss, CPA/ABV
Selling your business is not a decision to be taken lightly.
The process can be complex and time-consuming, requiring strategic planning and an advisory team of experienced professionals. We will guide you through the journey, highlighting the significance of each step and the essential role of your advisory team.
- Considering the Sale: The Genesis
The first step is acknowledging the desire or need to sell your business. Numerous factors can trigger this decision, including retirement, a desire for change, or a strategic move to leverage market conditions. It’s important to identify and understand your motivations, as they’ll guide your strategy throughout the process.
2. Assembling Your Advisory Team: The Cornerstone
Once you’ve decided to sell, the next step is to assemble your advisory team. This team comprises professionals who will help you navigate the complex process and ensure you maximize your return. The team often includes:
- An attorney specializing in mergers and acquisitions (M&A). Good attorneys are critical to making sure you negotiate the best terms possible, and you avoid any pitfalls that can negatively impact your post-acquisition.
- A business broker or investment banker experienced in selling business. Their role primarily involves creating marketing materials for potential buyers, finding, and vetting potential buyers, negotiating deal terms, and managing the entire transaction process from start to finish.
- An accountant specialized in transactions that can provide vital M&A due diligence, tax analysis, and financial and tax structuring support. They often also play a pivotal role in managing the workflow of the transaction and work very closely with the other members of the deal team.
- A wealth advisor to plan for and safeguard your financial future post-sale. Post-acquisition needs vary greatly by individual/family, so it is important to have a good wealth advisor to meet your specific goals.
Finding the right team can be daunting. However, many of the professionals listed above have a vast network of transaction-focused professionals and can get you in contact with the right team to make the transaction happen. Get in contact with your business’s attorney, banker, accountant, or wealth advisor and ask them if they work with any professionals that deal specifically with transactions. Vetting potential professionals for credibility and experience is critical to starting the most important process in your business’s life.
3. Preparing for the Sale: The Blueprint
After selecting the correct advisors to guide you through the process, your broker will put together a Confidential Information Memorandum (CIM). This is a comprehensive presentation that presents key information to potential buyers, including its operations, financials, market position, and management team.
Consider obtaining a sell-side Quality of Earnings (QoE) analysis along with the CIM. A QoE should be performed by your transaction-based accountant and offers an in-depth look at your accounting policies, financial trends, and financial health. This gives potential buyers confidence in your business’s stability and its future trajectory. Obtaining a QoE in conjunction with the CIM ensures all parties within your deal team are in sync and allows the broker and attorneys to maximize your market value.
4. Navigating the M&A Process: The Journey
Structured correctly, an M&A deal can help you reach your personal and financial goals. However, the process is complex can take anywhere from 6 to 12 months, or longer if significant issues cannot be negotiated between parties. The transactions that go smoothly are often the ones that are planned for appropriately. Proper planning could include obtaining a QoE report, selecting the correct team, or tax/wealth planning. Often, the planning and time spent up front saves significant time towards the end of the transaction and increases the likelihood of the transaction closing without significant hurdles.
5. Closing the Deal: The Destination
Upon successful negotiation and due diligence, the final contract for the sale is executed. Selling a business is not just a transaction; it’s a transformative event that requires careful planning, a clear strategy, and the right team of advisors. Being proactive, understanding the process, and having the right professionals by your side can make the journey smoother and more rewarding.
Summary
Remember, selling your business isn’t the end of the road; it’s a new beginning. With the right planning and advice, that new beginning can be a prosperous one.
