First-time business sellers often must negotiate an M&A deal with far more experienced buyers. If your buyer already has several acquisitions under its belt, you could be at a competitive disadvantage. Experienced M&A advisors, who can fight on your behalf for the best price and deal terms, are essential to overcoming this strategic disadvantage.
Survey the landscape
While most business owners only sell once, some buyers use acquisitions as their primary growth strategy and buy dozens of companies. Such companies typically have skilled teams dedicated to negotiating acquisitions.
Whether M&A transactions are alien to you and your executives or you’ve sold a company in the past, it’s essential to hire M&A advisors. To ensure the best deal, your advisors will discuss personal objectives with you — for example, whether you want to sell outright or retain a stake in the business — and provide an overview of the M&A market and sale process.
Your advisors will help you understand what your company is generally worth in the current market based on recent sales of similar businesses, and the types of offers that might be considered reasonable. They’ll also brief you on how to respond to common buyer questions and negotiation strategies and when it makes sense to fight for protections, such as termination rights that allow you to accept a superior offer from another buyer. Ultimately, you may want to empower your advisors to conduct negotiations on your behalf.
Use what you know
Another way to even the playing field is to leverage your knowledge of your company. If you’ve been a relatively hands-off owner in recent years, beef up on all aspects of the business — from projected revenues to employee headcount; intellectual property holdings to outstanding debt obligations.
Your advisor can help you get up to speed by conducting a presale audit that examines financial statements and assets and by having a professional valuator conduct a formal appraisal. These processes will provide you with the opportunity to fix any weaknesses and enhance strengths before they come under buyer scrutiny.
Don’t go it alone
On your own, you’re unlikely to get the better of a veteran buyer. There’s simply too much to know about M&A transactions. But you can minimize your buyer’s advantage if you know your company inside and out, understand what it’s worth in the current market and have the guidance and support of experienced advisors.
© 2015