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Three ways to enhance a company’s value before it sells


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Business owners who have recently sold their companies share what they learned.

Business owners are frequently approached with unsolicited offers to buy all or part of their companies, and this is often a sign they’re doing something right. Regardless of the catalyst, for those individuals who are interested in selling — whether in the near term or a few years down the road — early preparation and a thoughtful approach to the market are essential to maximizing the value of your business. Shirin Behzadi, strategy advisor and former CEO of Trilantic, and Darren Henderson, Founding Partner of Corient Capital Partners, share lessons learned from their companies’ recent experiences with selling their businesses.

 

Get into the early practice of maintaining high-quality records

Accurate and detailed recordkeeping that dates to the founding of the business can go a long way toward enhancing a company’s value by reducing the buyer’s perception of risk. For example, in a sale process it is important to have a high-quality earnings report along with detailed financial records for the rigorous examination that is part of the due diligence review process. This examination can take place before or well after the bidding process has concluded. “It was much more extensive than we originally anticipated,” says Behzadi. However, being prepared with reliable documentation enables a better decision-making, a smoother examination process and, ultimately, a more successful transaction.

 

Develop good relationship “partners” along the way

Long before an anticipated sale, it is crucial to have highly qualified advisors in place, from bankers to attorneys to tax professionals, and many others. “One thing I want to say about partners in general — you’ve got to choose them right,” Behzadi says. In particular, she explains, finding a well-suited banker takes time because they should have a deep understanding of the company, its industry and leadership’s goals. This will help the banker bring in the right team to assist with everything from positioning the business properly and determining the right set of buyers to advising on the appropriate process and negotiating a sale price. Ultimately, a good group of advisors will help guide the owner through the entire process of determining the timing and structure of an exit.

 

Assess your objectives and exit goals early in the process

“You need to understand, when you start those dialogues, what you’re trying to accomplish,” says Henderson. Before looking closely at prospective buyers or deals, company leaders need to consider some key questions. For example, is the company seeking a strategic partner or a financial one? This includes exploring strategic alternatives — such as a capital infusion, outright sale or change in control — to determine the appropriate course of action. In the end, knowing what you want to achieve from an exit, such as a total separation from the business or gaining a financial partner who is going to help you grow the business for the future, will help you focus on the parties that will ultimately provide the most value and structure leading to a successful transaction.



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Summary

Business owners interested in selling their companies should take a thoughtful approach to the market with high-quality records, qualified advisors, and an understanding of their objectives and exit goals.



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