M&A advisors and M&A attorneys are transaction driven. They have a process, checklists, who else they need to close a deal. For that process to work well and for an M&A practice to work at full capacity requires qualified sellers when they start the engagement.
However, even in this market with eager buyers flush with cash, it’s hard to find qualified sellers. Even owners who think they want to sell now have to be groomed to be successful sellers. But is that how investment bankers or M&A attorneys want to spend their time? That’s not the best and highest use of their time and expertise.
5 Things Owners Need To Do
Here are five things owners need to do to get to a good deal, that M&A advisors and attorneys tell owners a lot.
1. Prepare the business
2. Prepare the team
3. Prepare themselves/the owners
4. Prepare business and personal finances
5. Prepare the family for life beyond the business
After a brief initial meeting with an owner, most advisors share sage advice in all five areas even if the owner and/or the business is not yet qualified for their liquidity process. But those owners don’t seem to take their advice to heart. Not because they disagree or don’t want to. Rather, they don’t have the time, resources or expertise to apply that advice, so they settle back into doing what they do best and the necessary change(s) don’t occur.
Owners Can’t Prepare Alone
Owners of private and family run businesses are resourceful, independent leaders. They started and grew their businesses on their own. They haven’t used a team of outsiders before. Yet, before leaping into the transaction process and engaging an M&A advisor, they need the expertise of a team of advisors to achieve the outcome and exit criteria they have in mind.
Training Owners That Transition Planning And Transaction Execution Is A Team Sport
No one ever told owners that this very private, once in a lifetime transaction they are counting on will require a team to get the deal done. Before they qualify for the transaction process, they will need to surround themselves with a range of advisors to transform them into ideal sellers, and their business into a saleable asset. This team of business and personal transition planning advisors should include:
- Exit/Transition Strategist to minimize risk and maximize business value before entering a transaction, and to orchestrate an all-star team of transition and transaction advisors to closure
- CPA and CFO to provide clean books and prepare strong forward looking financials
- Tax Professionals specializing in their particular exit option and future objectives
- Insurance Brokers recommending products to protect the company and the owner(s) in the case of any (unforeseen, unexpected) contingency: a death, divorce, disability, disagreement, departure – which can put a transaction at risk
- Wealth Advisors to structure their investments and other assets before a transaction to protect and preserve the liquidity from a deal to last for decades not just a few years.
- Business Appraisers and Auditors to benchmark performance
- Other specialists as needed to prepare the company, the team, and the owner for the transition beyond the transaction.
Value to M&A Advisors of Expanding the Team
These early exit planning experts are invaluable to intermediaries because:
- They take an unprepared, unqualified owner who wants to cash out, and systematically prepare them to be a much better and smoother selling opportunity for the M&A advisor.
- They help make the company a more buyer ready, buyer attractive acquisition at a higher valuation which can command higher multiples.
- They prepare the owner for the demands of the selling process and position the owner as a seller with more leverage in negotiations, to sell well.
- They prepare the company for the demands of a buyer’s audit and due diligence, so there are ‘no surprises’ after the LOI.
- They reduce, if not eliminate, seller’s remorse.
- They increase seller deal compliance after closing with a designed and tested reinvention plan in place
- They work with owners and their companies over years in preparation for the transaction, and know the inner workings of both the company and the owner’s mind.
So the next time you meet an owner ‘thinking about selling’ or an owner whose business is not yet ready (sale-able) for your transaction process, instead of filing their contact information away to ‘check in’ next year or in two years to see what they’ve done; remind owners that becoming a qualified seller is a team sport. Direct them to the advisors who can transform that business and will return the client to you as a qualified and prepared seller ready for the transaction process.
Kerri Salls (@KerriSalls) is Founder and Managing Director of This Way Out Group LLC and the author of HARVEST Your Wealth (available on Amazon). Please reach out to Kerri if this has been helpful to you or your business owner clients.
