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The merger & acquisition market has gone quiet. If your instincts are telling you to wait a while before trying to sell your company, give yourself a nice round of applause. Your instincts are right on the money – pun intended, sorry.
Here is a list of 5 solid reasons for keeping your powder dry for three or four years.
- Buyers themselves are generally not doing particularly well. Therefore, they will have less money to spend, and will be more risk averse. Both factors drive lower offers.
- Your earnings are probably not especially robust. How could they be in this kind of economy? Projections of future profitability are all fine and good, but they have considerably less credibility in today’s market. Even if the buyer believes your forecasts, why should s/he have the same truly reflect in the offer? Better to negotiate from a position of relative strength.
- Companies that come out on the other side of this economic situation in one piece will find that many of their competitors will have disappeared. That means that you will have fewer rivals for the buyers’ attention and acquisition dollars once we are done with the recession… or better, when the recession is done with us!
- Every seller wants to differentiate his or her company from all the others in the industry. If you have used this time to transform your company into a prime strategic acquisition candidate, it may be the #1 choice for buyers seeking acquisitions in your industry.
- This position as the “only game in town” (or close to it) could allow your broker to conduct an “auction” among a number of highly desirable buyers. This puts you in control of the acquisition process, and can yield enormous financial rewards.
What you need is a process that is designed to help your company to become a highly attractive strategic acquisition candidate by delivering to you the picture of this candidate as painted by people who really know – key acquisition executives in prospective buyers. What comes next is fascinating
You decide which strategic assets to acquire and/or enhance in order to get your company’s strategic profile as close as possible to what the market has identified as ideal. Like most strategic decisions, these will turn on four key elements of your business environment.
1. Money
2. People
3. Time
4. The fit with your company’s vision, mission and core values
You should begin this process at least two years before you intend to put your company on the market. Three years is preferable. Why? Because development of solid strategic assets takes a minimum of two years and, often, longer.
Once you have made these decisions, it is time to incorporate them into a strategic plan that also includes provisions for enhancing your earnings growth and financial condition. The standard plan, including Vision, Mission, Long-Range Goals, Short-Term Objectives, Task Assignments, Action Items gets the job done. You should involve all personnel who will play a key role in implementing the plan.
Conduct periodic comparisons of plan and action (no less often than quarterly.) Such follow-up is critical to ensure that you maintain momentum. The strategic plan is a living document that must remain front of mind. Otherwise, it will gather dust, and you will have wasted a great deal of time and effort.
Go for it!
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This article has been contributed by Steven D. Popell. Steve has been a general management consultant since 1970. Steve is a Certified Management Consultant, business valuation expert, and inventor of ExiTrak®– a process designed to assist the privately-held company owner/manager to build an attractive strategic acquisition candidate