Prepare for Partial/Full Selling
When decision is made to sell the company (either partially or fully) to another investor, it is important to make sure the company is prepared for such a transaction, and that the potential buyer has the right image on the company valuation
In many ways, the situation is similar with the startup context, when looking for an investor. If in the startup case we are focusing on the business idea and concept, in this case the focus is on the real business and its potential to develop in the future. You could also consult a possible complementary view of the buyer, described in Implement a Buy & Build Strategy.
Below there is a sequence of questions we recommend you to think of, and where we can help you find an answer.
Why do I need a partial/full selling?
This is a challenging question you must answer. We assume you were the driver of the company through most of (or the entire) Company Journey, and in such case it is not an easy decision. You may think of an exit or retirement. You may face no succession plan, and, after investing so much effort and emotions, you want to keep the business running. Or you might want your business to be part of something bigger (becoming a target for another’s company Buy & Build strategy).
Is the company ready?
Deciding to sell the company you grew is hard. It will be even harder to discover, in the middle of the selling process, that your company has serious issues that would decrease its value or, even worse, will drive the potential buyers away. You must discover these issues before taking the final decision.
You should evaluate how aligned the existing shareholders are regarding the future of the company, including the selling intention.
Consider the management team stability. In many cases, the shareholders change, but the management team remain in the company and ensure the business continuity, so they become pivotal in the transformation of the company after the transaction is finalized (see also Post M&A Integration).
Consider the impact on the employees, too. Are there important issues? Would such a transaction trigger a wave of anxiety and uncertainty in the organization?
Are the processes consistently executed? Are the financial results healthy and reflecting the business potential and desired future?
How should I prepare the company for such a strategy?
If you reach this point of asking questions, it means you took the decision to do it.
This means finding solutions to the issues previously discovered, plan and execute the resulted transformation plan.
At the same time, define in more details the strategy, especially how your new business should look like in terms of positioning in the market, offering to the clients. You must also decide on the targeted business profiles you are looking for (e.g. size, portfolio, position in the market).
What do I need to prepare?
We assume you have an answer to the previous question. You also have a list of identified issues to be solved. They must be addressed first. Some might take more time to solve, some less, but you should address them before proceeding to company selling specific activities.
After the most important issues are solved, it is time to prepare for the transaction. It is usual to build an information memorandum, describing the company from different aspects, both historical, actual and future perspectives. This will be the starting document for discussing with interested buyers, so its content should be clear, structured, realistic and built on facts.
Eventually, the transaction will reach the negotiation point, where you should have your own price expectation and the arguments behind the valuation. The transaction will be more likely to happen if you have a realistic fair market price range in mind when entering the negotiation.
How do I sell?
Following the sequence of questions above, you will be prepared to enter in this process with a prepared company (the most important issues already addressed), a clear company picture (information memorandum), and a realistic market price range.
Depending on the complexity of the business, complexity of shareholder structure and other factors, the selling process can be anywhere between relatively simple process or very complicated one. If you never experienced such a situation, we will help you understand the process and its requirements.
For the concrete selling, there are specialized companies (M&A agents) that will help you finding potential buyers, support you during due diligence activities and offering specialized advice throughout the process. A good M&A agent will make a difference and we can help you choose one.
Through our guidance, coaching and direct involvement, in this stage of your Company Journey you can achieve the following results:
Identified weaknesses and strengths of your business
An investment memorandum describing the company and contributing to maximizing the valuation of the company
Portfolio elements reviewed for the new company positioning
Updated organization structure defined and rolled out in preparation for the future transaction
Professional management prepared for M&A integration activities
Pragmatic processes and IT infrastructure defined and rolled out, prepared for future integration in the new business context
M&A agent to support you during the selling process
Financial and non-financial reporting systems and procedures defined to support new business steering after the M&A transaction