Mergers & Acquisitions

Mergers & Acquisitions, the owner may want to sell the business. Having an idea of what the business is worth may influence the decision as to whether or when to sell. A side benefit of a professional appraisal is obtaining advice on what to do to make it easier to sell and to maximize the sale price.

When contemplating selling a business, an appraisal should be done as early as possible, preferably three years or more before the contemplated sale time. This will be helpful in planning the timing of the sale as well as in identifying strengths and weaknesses and capitalizing on the strengths and curing the weaknesses.

To maximize the sale price, it is desirable to forecast revenues and expenses out at least a year and have a record of how accurate the forecasts were. Buyers like dependability. It is desirable to have the books and records in tip-top shape. Buyers like transparency.

It is important to minimize the personal expenses going through the company's books. Take retired Grandma off the payroll. Sell any assets that could be considered nonoperating or excessive (e.g., the company airplane, a hunting retreat, etc.).

Hire the best possible business broker and follow his advice. A good business broker has the wisdom born of experience to work the market to your best advantage.

While it is generally good if the broker can find a buyer that has synergies with your company, don't expect the buyer to pay the full value of the synergies. A synergistic buyer will probably pay a little more than a strictly financial buyer, but usually less than half of the value of the synergies.

A buyer buys a business or an interest in a business for what is expected of that business in the future. Recent performance history is often useful as a guide to what to expect in the future. The buyer will largely discount the business's potential unless the business has a proven track record.