How to Maximize Value During an M&A Transaction

M&A transaction

Selling your business is a huge decision — perhaps one of the most important decisions you’ll ever make in your career. While not the only factor, price will be one of the most important factors driving discussions with potential buyers. As with most interactions in life, you’ll never get a second chance to make a first impression, and there are specific things you can do to maximize value during an M&A transaction.

Start Planning Your M&A Transaction Early

One of the most important steps any business owner can take in the life of their company is to plan ahead for an eventual sale or retirement. This is essential if you’re planning to sell your business in the next several years, but it’s also important if you’re planning to hold on to your company for the long haul, as planning can help smooth any unexpected transitions due to illness, death, or a sudden change of life goals.

Pre-sale planning has many layers; it involves making sure you have the right processes and people in place to keep the business running successfully should you exit or step back from the business a bit. Identifying potential problems and hammering the kinks out of business processes to have them running smoothly will give buyers confidence in the business and also help maximize value during an M&A transaction.

Proper planning also entails making sure all the I’s are dotted and T’s are crossed in terms of documentation and making sure your company’s financials are in order, which demonstrates transparency and will help the due diligence process move along at a faster pace.

As well, it’s never too soon to start working with an investment banker to have a valuation done and discuss putting strategies in place to help get the maximum value when you decide to sell. This will also help give you an idea of current industry and market trends in order to give you a realistic idea of what your business is truly worth.

Understand What a Buyer Wants

As part of the planning process, experienced investment bankers like the team at MelCap will help you view your business through the eyes of a potential buyer and provide guidance on what a buyer wants and how to make it more attractive to buyers.

It’s important to understand what business buyers want and that different buyers look for different things. In general, buyers would love to buy a company they can grow, build on, or use to boost their current service or product line. They’d like all of the things we touched on above — including a strong management team, financial transparency, and problems being identified and resolved and dealt with before the deal. Business buyers also want to make the most of an excellent opportunity. A company with the ability to demonstrate a track of growth and profitability is sure to please potential buyers and maximize value during an M&A transaction.

Have a Clear Vision

Buyers are also attracted to deals in which the business owner has a clear vision of where the company needs to be and how to get it there. Owners are often so consumed with the day-to-day running of their business that they fail to plan a direction for the future. It’s essential that they not only plan but that they invest in their people and their processes to put the business on the path that’s been laid out.

By working with a company like MelCap early on in the process, a business owner will be better able to address all of these factors, as well as thinking about their own wants and needs for the sale. Would they like to sell completely and move on or still be involved in some way? Do they have a vision of what type of buyer they’d like to sell to? Do they have a set sales number in mind that must be met for the sale to take place?

An experienced advisory team can help a business owner work through all of the issues that may arise during a sale, as well as after the transaction is complete. By planning ahead and planning well, you’ll be able to minimize risk, maximize value, control the process, and ensure that you’re exiting 100 percent on your terms when the time comes to move on.

By Al Melchiorre

Al founded MelCap Partners in 2000, and is responsible for managing all aspects of client engagements from proposal through closing, developing business, reviewing offering memorandums and financial models, negotiating purchase agreements, and interacting with buyers and investors.