Understanding what the buyers are after and being prepared for it is key to optimising the outcome of a sale process.
Let's revisit what the prospective buyers will be looking for to give us a clearer idea of what we are preparing for. In summary, buyers want to put their money into a well-run business with no hidden surprises, where:
The business is growing and is profitable, and
it is led by a capable leadership team, and
where the long-term outlook for the business is great.
With this in mind, we have put together three key points, which in our experience go a long way towards optimising the outcome of a sales process.
Think like a buyer
First of all, think like a buyer. Put yourself into the shoes of the prospective buyers and develop the buyers' vision, clearly showing how buyers will get a great return on their investment in your business. In addition, defining the buyer's vision will focus the marketing part of the sales process on promoting your business to the buyers' objectives and needs, making it more relevant and compelling for them.
At the end of the day, buyers buy into the future of the business. Past performance is used as an indicator of the future performance and ability of the business to achieve new heights, but it is the future opportunity that excites the buyers.
Developing this vision will articulate that future opportunity and help you identify the areas that hold the most value for buyers, highlight those through the process, and anticipate the information buyers will need to see, preparing you for due diligence.
Manage risks
Any business risk identified or perceived through the sales process may reduce valuation.
As there is no risk-free environment (not that we know of at least), the key is to have a capable leadership team, who can identify and manage the risks associated with the business and its performance. Make sure risks and mitigation strategies are known, communicated and acted upon, addressing things like:
Client revenue concentration
Non-compliant contractual arrangements
Litigations and disputes
Debt and losses
To present the business in the best possible way through a sale process, you need to have developed the core aspects of the business that support its growth and address these risks, from a clearly articulated strategy to the smooth operation of a business engine that can execute on it.
Having a comprehensive approach to developing and maturing your business will help you prepare and optimise for a future sales process. As we mentioned in a previous post, we have developed our Vision to Value framework to help you assess and prioritise value creation through each stage of growth of your business. Our framework covers all the critical aspects that investors will focus on when determining the quality and maturity of the company to gain confidence in its future performance. So when you get to the sales process, you and your business are well prepared to go through any buyer's intense scrutiny.
Get transaction-ready
Buyers will need to see evidence that supports the statements you make about your business. All core aspects of the business will be reviewed in detail, from financial and legal to business operation and commercial.
To be transaction-ready, you must be able to clearly describe what the business does, how and why this is of value, and organise all the documents and assets required to demonstrate these facts during the detailed due diligence phase.
The better prepared you are for this, the smoother and shorter the process will be. As a result, it will be less disruptive to your business and team and have less likelihood of creating uncertainty for the prospective buyers, which could potentially erode their confidence and, therefore, the price.
Keep this in mind also as you are working on the business now. Document key processes and keep things as transparent and straightforward as possible.