You may be experiencing pressures that are causing you to consider possible changes in direction.    When business concerns, family issues, age, or health-related concerns come into focus, we all need to take a step back and consider our options. Invariably your possible avenues forward often involve questions related to finances and/or time. For me, the driving concern had to do with operating two companies (one was doing well while the other needed major surgery in the form of a business turnaround to survive). I chose to market the profitable business, while working to turn the other original company around, and back to profitability.  After all I thought, it’s much easier to sell a winner than it is a loser! 

If the time comes for you to consider selling your business, you may find yourself asking some of the same questions that I did.

Who is a possible buyer for my business?

Now unless you have an offer in hand, this is literally the million-dollar question.  Depending on the success of your company, and the amount of interaction it has with other businesses you might be surprised at the number of interested and qualified parties out there who are looking.  Identifying the right potential buyers (competitors, private equity groups, family offices, institutional buyers, and investors) takes more than a good working knowledge of the business and its potential.  Your buyer may be new to your industry or perhaps a competitor who is looking to expand their own customer base and/or product or service offering. These questions are important and will often affect the price that you are eventually offered.

So back to my own experience, why did my company sell to the first interested party?  Did the stars just align?  Actually no.  My company was profitable, served a nationwide dealer base for its products, was constantly developing and fielding new products, and remained visible and competitive.  In my case, my buyer was a much larger national manufacturer with majority market share in their own niche.  They were actively looking to grow their business by acquiring “bolt on” existing businesses, even ones that were outside their own market.  They were experienced buyers, had an integration plan and came with cash to buy me out.  Looking back on it, I was lucky to be approached by a strategic buyer, and timing was certainly a factor.

Where do I go to find that right buyers for my business?

Successful Mergers & Acquisitions (M&A) transactions are often about timing, and yours is probably no exception to this unfortunate fact. What is the condition of the economy, at the time you decide to market the business?  Is your market expanding or contracting? What about the cost of capital, and how will interest rates affect the potential buyer pool? How much risk is the buyer willing to take in terms of “blue sky”, and how will this affect their offer? How is your business doing in terms of profitability and financial outlook for the foreseeable future? These and other questions are also important to you as they too will undoubtedly affect any offers that you will receive.

So where do you look to find a buyer?  Will a competitor be the right choice?  What risks are involved if you approach them directly?  After all, “loose lips, sink ships”.  Do you simply advertise on internet sites, put up a sign and hope for the best? Do you have any contacts in private equity, family offices, or have business relationships with high-net-worth investors?  These are just some of the questions that come to mind.

Should I consider hiring an M&A advisor to help sell my business?

It is a wise idea to evaluate your own time available in addition to M&A experience and abilities before you embark on selling the business yourself. Remember, your proven abilities as a business owner are in building and operating the business. Business performance is what makes the business attractive (or not) to potential buyers.  It is important to keep your eye on the ball and maintain or improve business performance during the M&A process. Often this proves to be a full-time job in and of itself.  

Depending upon the size and complexity of your business you will probably need more than just an M&A advisor.  You may need a team of qualified professionals as you go through the process including your CPA, an attorney familiar with contracts and M&A transactions, an M&A advisor, and possibly a well-versed real estate broker. You may also consider hiring a business valuator to better understand your company’s worth before you set an arbitrary price.  This is not the time to pinch pennies.  Hiring the right professionals may end up saving you money when it’s all said and done.  Further, M&A negotiation is an art and having the right team to work for you and help you through the process can make all the difference.

How do I find a qualified and experienced M&A advisor to help me sell my business?

Generally, M&A advisors are either specialists focused on specific industries, or generalists working across many different industries.  Sometimes the best approach to finding the right M&A advisor is through your trusted attorney or accountant.  Additionally, there are various associations with memberships such as The Association for Corporate Growth (ACG), National Association of Certified Valuation Analysts (NACVA), Alliance of Merger & Acquisition Advisors (AMAA) and others.  These are well respected organizations who promote professional standards in M&A.  

Often, M&A advisors have a financial background and business experience of their own.  An advisor who also has experience as a valuation analyst brings a whole new level of understanding to the engagement.  This can be helpful when offers come in based on valuations and EBITDA multiples.  Sometimes M&A advisors are also CPA’s, attorneys, or even former CEOs with operational and seller experience of their own.  It is important to work with an advisor who is both open minded and fully engaged in understanding your business from the inside out.  But they need to be available and focused on the project at hand so pick one who has time for your project.  Most importantly, look for an advisor who has experience finding qualified buyers, and one who will represent you and your interests in a professional manner.  

If I choose to hire an advisor, what will they be doing during this process?

Once you decide to engage an M&A advisor to help sell the company, both of you will be busy discussing the business and answering a myriad of questions.  These are the same questions and information that any astute buyer should be asking down the road in the process, and you need to have these questions resolved before marketing the company.  Together you and your adviser will be creating a marketing plan of action, a road map that he/she will follow to promote the business for sale.  

Your advisor will work with your attorney, accountant, and often confidentially with key employees compiling all the necessary reports and history of the business into a Confidential Information Memorandum (CIM or “the Book”) that will be used by vetted potential buyers. The CIM should be an attractive, bound volume that tells your business story and financial performance.   Depending upon the business and potential suitors, this CIM creation can take time to complete (often up to 90 days) but sometimes longer.  As a component of marketing plan, your M&A advisor may also create a “teaser” to post online or use when contacting potential buyers. A teaser is intended to announce availability of the business without providing its identity.  Many advisors will build a PowerPoint presentation for use down the road, once fully vetted and qualified buyers are ready to meet.  

Once you have approved the marketing materials, your M&A advisor will begin the marketing process.  Often this process involves reaching out to potential buyers, responding to email and telephone inquiries, and vetting potential buyers to be sure they are qualified. Generally, your advisor will require all interested parties to sign nondisclosure agreements as part of the vetting process, before the CIM is shared with the buyer.  Normally the communication continues through the advisor as the marketing process moves forward until a later point in the process when buyer due diligence sometimes requires direct contact between the buyer’s agents and the sellers.  Even so, the M&A advisor will normally remain at the center of the process, reporting to the you the seller, offering advice and following any direction that you give them.  This allows you to focus on the business while the advisor handles the legwork and communication involved in the transaction process.

How much time should the transaction process take from start to close? 

Every Change in Control transaction is unique with its own opportunities and challenges.  There are many factors in addition to an acceptable price, that will affect negotiations and the transaction.  Taking the business to market requires careful study, planning, and the production of quality marketing materials.  This in turn affects how the business is both presented, and received?  You want to have your ducks in a row before you begin marketing the business.  Typically, an M&A transaction can take 12 – 18 months or longer, for lower middle market businesses.

Should I be concerned about downside risk of my employees, customers, or competitor’s if news of the sale gets out?

Confidentiality is a primary concern to most owners, as they are concerned about the potential of losing customers and employees – once the word is out.  This concern can be an ever-present worry that the seller must endure throughout the process until the day the transaction closes.  Experienced M&A advisors recognize this perceived risk, and utilize various tools such as project code names, private email accounts, off-site meetings, marketing teasers, non-disclosure agreements, etc., to safeguard confidentiality of the project.  However, in the end the word will eventually get out, and you need to be prepared for this eventuality.  In my experience honesty is the best policy when the inevitable happens.

There are many types of success, and being a business owner is both a challenging and rewarding accomplishment.  As entrepreneurs, business owners, and eventually business sellers we all need to be positive and yet realistic about time and the things that are most important to us.   If you should find yourself considering a change in direction, that’s ok.  Just remember that life is a journey filled with many changes along the way. 

Ready to start a conversation about your business?  You can reach Todd Warner at (559) 294-8000 or email at tw@AgribusinessBrokers.com., or find additional info at https://agribusinessbrokers.com/ 

Todd Warner is an entrepreneur and experienced owner/ operator of both manufacturing and service businesses.  He owns and operates Agribusiness Brokers Corp, a Clovis, California based Mergers & Acquisitions Advisory representing Agribusiness and Industrial companies. As an M&A Advisor he has represented Middle-market business owners in successful M&A engagements, in New York, Illinois, Minnesota, California and Hawaii.  Mr. Warner holds various certifications including CVA, CM&AA, and CMAP and is a licensed Real Estate Broker in California (DRE 01737715) and FloridaAdditionally, he is a FINRA Registered Representative: Series 7 (General Securities Representative), Series 63 (Uniform Securities Agent State Law), Series 79 (Investment Banking Representative) and the Series 82 (Private Securities Offering) as a representative of StillPoint Capital, LLC, Member FINRA and SIPC, Tampa, FL.