As many of our loyal readers know, from time-to-time we like to give you intel on how buyers are approaching the M&A market, and how you can benefit from this knowledge.
Since the vast majority of our readers are owners of privately held companies, the more you can understand about how buyers are approaching the market, the better armed you will be to obtain an optimal deal for your company when you decide to exit.
This is especially true in our current environment where buyers are looking for deals (and unwilling to pay top dollar unless you have professional guidance in most cases).
So when themiddlemarket.com recently published an article entitled “11 factors for dealmakers to consider before buying a company during the pandemic”, we thought we would share some of them so you can see how you need to address buyer concerns/issues as we move forward.
Although many of the items are true during the acquisition of any privately held company even during the best of times, what it showed us is the reality that most business owners are underprepared to negotiate from a position of strength UNLESS they understand the key issues impacting deals today from a BUYER’S perspective.
A few of these eleven factors really stood out to us given our current challenging times:
It is vital to remember that buyers are buying your future – NOT YOUR PAST! This has always been true, but it is really important to consider if you are talking to buyers today. If you have innovated, if you have come up with strategies that have helped you survive the last few months, and especially if you have adapted to the new world we are in and thrived, it will be vital that you make buyers aware of what you have strategically done. Don’t assume they will “get it” from your documentation you present. Brag about what you have done! Shout it from the mountain top!
If anything has become clear, even the smallest of business operations needs to develop business continuity and disaster planning within its operations. This is not the last major business disruption we will face – regionally we deal with earthquakes, wildfires, floods, hurricanes, and dozens of other potential interruptions. This pandemic has clearly shown how critical it is to have back-up plans, remote work sites, and other documented ways of doing business in the face of planned (or unplanned) disasters. Having survived this one, it is vital to document how you did it (and prepare for the next one!).
Finally, the Japanese Tsunami in March of 2011 was a wake-up call to the auto industry. And the trade wars the past year have clearly demonstrated that having multiple supply chains located in varied locations is vital. This is even more important as buyers begin to examine your business and how you are supplied by your vendors. If you have one vendor accounting for a substantial portion of your business, you need to address this in order to obtain maximum value for your business, no matter what economic cycle we may be in.
And that last point is really key. As we have said before, this too shall pass. But when it does, buyers will always maintain their risk reduction goals associated with any business: How can they be assured that any privately held business will grow and flourish once the founder has moved on? This is when due diligence becomes paramount – and that will never change.
What these eleven factors point out more now than ever before is how critical it is to have professional M&A advice LONG before you begin your exit journey. We have never met a business owner who was upset at starting his/her planning too soon.
If you are interested in beginning your journey to obtaining maximum value for your business, no matter the current economic cycle, you need to reach out to Generational Equity and meet with an exit planning professional at one of our conferences near you.
The time you spend learning how to maximize your exit will be invaluable. To learn more, call us at 972-232-1121 or visit our website, provide us with your contact info, and we will be in touch.
And again, special thanks to our friends with themiddlemarket.com for providing us with valuable insight into how buyers are approaching the market today. If you want to see all eleven factors, you can do so by downloading this valuable report here:
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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