Recently, I was asked the question, “Can a transaction be a WIN/WIN?”
In sport’s we see winners and losers and assume business is that way. If someone wins then someone must lose. Too many sellers go into a transaction with the mindset, it is my company so it is my way or the highway. Strangely enough that mindset introduces risk into the equation. Risk is usually associated with a lower valuation. Unfortunately, for sellers with that mindset buyers have other options and tend to take their moneys somewhere else.
So, what can you as a seller do to make a transaction Win/Win.
1. Know your objective:
Before you decide to sell, get the expertise and advice needed to understand what you are trying to accomplish. The sale of a privately held company is a complicated process requiring knowledge, expertise and strong negotiation skills. Few business owners possess these traits at a level sufficient to complete a transaction. Have your company evaluated and prepared for the process of going to market. Understand,” what is” a fair market value for your company. Understand in advance what is important to a buyer. How they look at your business. Surround yourself with your team of professionals, accountants, attorneys, wealth advisors and M&A advisors before you go to market. Use them to assist you in filling in the gaps in your company. Allow them to do their job.
Remember: Negotiations commenced from a position of knowledge have a greater probability of achieving the desired outcome.
2. Full Disclosure:
Be an open book. If you have prepared your company properly you should be able to provide detailed information that is both accurate and verifiable. Be candid about the strengths and reveal early in the process any weaknesses.
Be collaborative. The best deals are those where buyers and sellers are working together for the greater good. Negotiations about price are certainly a part of all transactions. But once price is established there are many things that can usually be done to facilitate the ease of transition and ensure additional value creation.
In closing, know your objective, be candid about both the strengths and weaknesses of your company and then work collaboratively to facilitate a better outcome.
Sponsored in part by:
George Walden is a Managing Director and Principal in Corporate Finance Associates’ Houston office with twenty-five years experience as a middle-market investment banker. George is a member of CFA’s equipment industry practice group and an expert in the precision machining industry with special emphasis on manual machining, CNC precision machining, and gun drilling services and has been responsible for several industry-leading transactions. You can learn more about George HERE.