Tom Norwell has been an executive leader in business for over 25 years both in Canada and Australia. Tom became a Boardroom Metrics Accomplished Executive in September of 2010.
What Matters when YOU’RE looking at selling or transferring ownership of your business?
- is the tenure of your staff, most notable senior staff, long? This could be a positive or a negative to a Buyer. If the Buyer is a ‘strategic buyer’ they are probably anticipating a lift in economies of scale through leveraging their existing infrastructure by enveloping many of the administrative functions in. This poses the potential financial burden of severance that may not have been anticipated by the Seller.
- Is the business largely reliant on third-party suppliers and based on contracts or relationships with owner/management? Buyers are going to want to know that the business can financially transact in the same fashion once ownership has transferred.
- Are the operational processes documented and up to date? The Buyer is going to want to know that without the existing owner (and perhaps management) the business can operate as efficiently as historically.
- Does the business demonstrate a predictable financial track record? Buyers are wary of material peaks and valleys in financial performance that are not readily defensible. Short of seasonal variances the Seller had better be prepared to defend, in detail, these anomalies.
- Are there audited financial statements? A Buyer is not going to rely on the financial performance being solid based on a ‘nudge-and-a-wink’. In the absence of audited financials the Seller is potentially looking at; representations and warrantees, taking back paper, or even a smaller payout than was anticipated.
- What happens to the working capital? Is it the Sellers expectation that they will strip out the cash from the business? Buyers want to know, with certainty, what the post transaction financial requirements will be in running the business.
- Are all the supplier and customer contracts in force and transferable? Many times contracts such as leases or vendor agreements are not easily transferable.
- Are the shareholder agreements in place? A Seller shouldn’t be running around trying to get this done when you should be focusing on closing the deal.
- Are there any pending/outstanding litigations? There is nothing that a Buyer hates more than pesky (and sometimes not-so-pesky) legal issues rearing their heads.
- Are you represented with adequate legal representation? Better to do this sooner rather than later in the process. Ensure that you get a legal firm that has a track record in M&A work. Even if you’re a small business. You’re current business/family lawyer is not equipped to advise you. It may cost you alot more than you had anticipated. But think about it, … … … this is the most important transaction of your life. Spend the extra tens (maybe hundreds) of thousands of dollars. Don’t be penny wise and pound foolish.
These are just a few things to keep in mind. Bottom line: … EVERYTHING MATTERS! … Be prepared!
Since 1994, Boardroom Metrics has provided professional advisors, senior interim management, assessment tools and processes to help build business value. Whether your goal is to take your business to the next level or you want to position your company for sale to new owners, the Boardroom Metrics approach can help.