It’s business as usual, but you are starting
to think about retirement. There is
much to consider so it is important to think things through and prepare yourself
and your business to maximize value and
retire in the way that best suits you.
“Privately or family-owned businesses
are typically run to maximize the benefits
to the current owner(s),” says Vincent
Della Rocca, director at SunTrust
Robinson Humphrey in Tampa. “When
considering the valuation and sale of a
business, it is important to look at the business through the eyes of a potential buyer.
Preparing a business for sale is a process
that begins well in advance of the engagement of a financial adviser.”
Smart Business talked with Della Rocca
for more insight on what owners should
consider as they prepare the business for
their retirement.
What are the first steps an owner should take in
preparing for retirement and the sale of the
business?
This space last month addressed the continuation of a business beyond immediate
ownership over the long term. In any circumstances, a business owner should be
working on the positioning of the business
and be cognizant of the company’s market
valuation continually throughout its operation. Make sure that your financial information is correct, up to date and accurately
reflects the true underlying business and its
ability to generate growth and profits.
Expenses and income distributions that are
set up for the combination of family and
business benefit should be easily identified
and explainable. Look at the financials
through the eyes of a potential buyer. Make
sure that a potential buyer can see the true
business potential if they were running that
business for their own benefit. Audited
financials will provide the most assurance
to potential buyers. If you don’t want to go
to that expense, at least have an experienced third party look over the financials.
Is there a ‘right time’ to sell?
That is a personal decision, but you need
to be realistic in your valuation assumptions given the prevailing market conditions at the time of your decision. You need
to consider your age, your health and your
family situation, as well as the attractiveness of your company to the market at that
point. You will want to reflect on what you
want to do in retirement and when you
want to start doing it. Are there family
members active or interested in the business? How might that affect your retirement plans? Once you have made the decision to start the sale process, you need to
determine the best route to follow and do
it as expeditiously as possible.
While it is impossible to predict the
future, the current mergers and acquisitions market has been very active and valuations have been at all-time highs.
Is retaining an adviser the best route to follow to sell my company?
Yes. Your adviser will assist you in a number of areas, including insulating you,
advising you on the best route to take, and
executing and completing the sale. Besides
knowing the ins and outs of mergers and acquisitions, your adviser will know how
to identify and approach potential buyers.
Some of the best potential buyers may be
competitors, friends, colleagues or someone unknown to you. Your adviser will be
able to determine a list of potential acquirers to maximize interest in, and value of,
the company. A third-party adviser also
insulates you from direct contact with
potential buyers and the negotiating
processes and the issues that could arise
from those processes. Negotiating a sale
with a friend or a competitor could have
negative ramifications on the terms or pricing of the sale, the ongoing company operations or your personal life. Although your
adviser will provide you advice, it is your
decision on how closed or open you would
like the process to be. Another area for
assistance is determining and ranking your
objectives. These could include: speed of
execution, confidentiality, employee or
customer relations, and maximizing price.
Remember, you are only going to sell this
business once, and you want to do it right.
What should I consider when evaluating
prospective buyers?
Your adviser will perform due-diligence
on all interested buyers in order to qualify
each one. Your adviser should evaluate
each buyer’s financial situation, ability and
‘track-record’ of closing as indicated under
the original agreed-upon terms. You don’t
want a buyer to walk away from the transaction at the last minute or have the transaction fail due to a buyer’s inability to procure financing. Surety of closing is the No.
1 qualifier for any potential buyer.
VINCENT DELLA ROCCA is director at SunTrust Robinson
Humphrey in Tampa. SunTrust Robison Humphrey is a service
mark of SunTrust Capital Markets Inc. Reach him at (813) 224-2397 or [email protected].
