How to get what you’re looking for when constructing a business deal

If you plan to sell your business and quickly sail off into your retirement years, you may want to think again. Your willingness to stick around after the transaction is complete, serving as a bridge from the past to the future, can go a long way toward maximizing the value of your company.
“Buyers aren’t going to feel comfortable acquiring your business if they know the intellectual capital is leaving the day after they close the deal,” says Rich Anderson, managing director for corporate investment banking at Moss Adams Capital LLC. “Buyers like to know that the principals, while they’re getting their liquidity event, are willing to stay and be there to ensure a smooth and orderly transition.”
The pursuit of liquidity is one reason for pursuing a transaction. Raising capital to expand your business is another. In either case, you need to take a thoughtful approach when pursuing a deal.
Smart Business spoke with Anderson about how to position yourself to make a smart deal for your business.
What’s the first step when considering the sale of your company?
Look at how your business is positioned in the market and try to make an informed and objective assessment of what the future looks like.
That is what potential buyers are going to key in on. Put yourself in the shoes of the buyer when starting out on a project. How is your company performing? What are the growth opportunities for your company going forward? What resources will it take to execute on those growth initiatives?
Sometimes the big need is capital resources. Other times there may be a need for managerial expertise. The business may need supply chain or distribution or sales and marketing expertise to accomplish those initiatives.
Once your objectives are clear, look at your business through the eyes of a potential investor or buyer so you can see how your business will be viewed if you go to market. It may be that after consulting with your financial advisers, you identify a number of opportunities to focus on in the next year or two to get more prepared to go to market. Or you may decide the time to go is now.
You need that rigorous analysis of your business and of shareholder objectives on the front end to help frame the thought process and decide if it’s now or later. That’s one critical element that’s done in markets both good and bad.
What kind of prep work can help the process run more smoothly?
You need to have a clear sense of what you want to accomplish. Are you looking to get out of the business entirely or just take on a partner you can work with? Your approach can vary quite a bit depending on your desired outcome.
It helps to have an adviser who can ask open-ended questions to drill down to your key objectives and get those out on the table for discussion. These are things you need to think about before you move ahead with any formal actions to ensure a smooth transaction for your business.
It will take time. If you’re thinking of selling your company in 2015, that doesn’t mean you’ll be exiting in 2015. You’ll probably be leaving in 2016 or 2017.
How do you protect against rumors of a possible sale getting out?
The goal is to run a very efficient and quiet process.
The reason you don’t want to announce your intention to sell is that there are no guarantees that the transaction is going to happen. When you go to market, the goal is to have a transaction take place. The market or the operating performance of your business could change, however, affecting the valuation and marketability of your company.
When you go to market, you need to have a nondisclosure agreement that prohibits any suitor or investor from contacting any employees in the company, customers or suppliers for any reason. The suitors need to maintain confidentiality by limiting the number of people within their own business who are aware that they’re in discussions with a target company. ●
Insights Accounting is brought to you by Moss Adams LLP