Becoming M&A pitch ready
The ups and downs (mostly downs) of the pandemic have put a number of companies in precarious positions leaving some business owners looking for a favourable way out or to join forces with other businesses in order to strengthen their performance. Merger and acquisition (M&A) activity was adversely affected by the onset of COVID as some buyers took a step back and pivoted their focus to other matters within their businesses, but if you are an interested seller there are still those who have seen the pandemic as a great opportunity to expand through M&A. If you are looking to sell your company, you have to ensure that you are sale and pitch ready well before approaching potential buyers and here are a few steps you can take before going to market.
Firstly, you need to establish your why; why should a potential buyer be interested in you specifically? You are making a sale and like any other sale you need to market yourself and convince buyers that you, and not your competitor, are the right choice. Determine what your unique selling proposition is and clearly articulate why that would be of benefit to a potential buyer.
Next, if you want to sell your business you need to know how much you should sell it for, i.e. what is the value of your company. For publicly trade companies this step can be simpler than it would be for privately held companies, but even then valuations are still highly subjective. It is key to have a good understanding of how much your business is worth before seeking a buyer, so they have somewhere to start when deducing their offer price; and since this is not an off the shelf transaction, both your valuation and the buyer’s offer price are negotiable. There are a number of ways to value your business such as discounted cash flow analysis or multiples approach, among others, and with whichever method you opt for you need to ensure your analysis is as unbiased as possible; it may be worthwhile to hire an external valuator.
Once you have established a reason why your business should be purchased and its price, you have to communicate it formally on paper in the form of a sales memorandum; this is your marketing document. You can have the best sales offer on the market but if you cannot effectively communicate it then you may find yourself without any interested buyers. Again, it may be worthwhile to hire an experienced expert to compile this document as they have an in-depth understanding of what buyers look for and how best to present information to them.
The above steps have been greatly simplified but they should give you a good place to start in your M&A pursuit. M&A transactions, when put into practice, are extremely complex and if not done right could leave you with the short end of the stick. Though the services of skilled professionals such as Baker Tilly come at a price, hiring M&A experts even prior to engaging buyers will ensure that you position yourself as an attractive prospect and get the best deal possible, which can be more challenging during a crisis where buyers have a lot of leverage. It is invaluable to have someone looking out for you from the onset of the M&A process and with Baker Tilly in your corner you can trust that your best interests are always at the forefront.