By Jason Rigoli, Principal at The White Oak Group
As the M&A market continues to improve, companies are beginning to explore options to help achieve their strategic growth opportunities. However, there are a few things for business leaders to keep in mind to maximize their next transaction.
Based on a recent article by Paul Hartzell, Senior Vice President of Merrill Data, following are a few tips to help you make the best of an offer:
1. Prepare for thorough due diligence
With strategic buyers on the rise and financial buyers on the decline, it has become very important to make sure that your presentation of due diligence is comprehensive. This ensures there are no surprises as the deal comes to a close. Follow an approach of full disclosure and transparency to prevent unexpected renegotiation, lower valuation, or complete withdrawal.
2. Evaluate the “readiness” of your company
- Assess the company’s sales and profitability trends, combined with market developments, to determine if you are ready to go to market.
- Prepare and validate financial records to avoid errors coming up during the deal process.
- Thoroughly analyze customer and market trends to help create a three- to five-year strategic plan and financial forecast. Resolve any legal, operational, managerial, or environmental issues that may exist.
- Develop a summary of marketing and sales plans which includes your new business pipeline.
3. Assemble the right team
It is important to ensure that the M&A process is finalized in a timely and ultimately successful manor. To give your company the best chances at a successful and efficient deal ask yourself the following:
- Does your management team have M&A experience?
- What preparation work must be completed and what resources will be required?
- Can my company support the burden of an M&A transaction and still function at a high level on day to day activities?
- Can the management team find time to lead the company through the preparation process and be available to respond to arising issues and unexpected challenges as a potential deal unfolds?
4. Position the company correctly
Package the company objectively to ensure that you are presenting it from the buyer’s perspective. Focusing on the buyer’s interests will give the seller the opportunity to maximize the value from the interested party.
5. Identify the right buyers and sustain a competitive process
Involve an objective third party, such as an investment banker since they have knowledge of and access to a broader range of buyers. They will also better understand how to customize the approach to each party to ensure the maximum chance of success. Consult with M&A experts who have the necessary experience to read the situation and keep the deal on track. Lastly keep multiple interested parties involved to create and leverage competition to obtain maximum valuation.
Do you have any additional tips that can help maximize M&A deals in this economy? Please comment below and share your ideas.