So you’re thinking of selling your business and you’re wondering whether you should engage a business intermediary, broker, or mergers & acquisitions professional to help you through the process. Why should you? What value will they add to your transaction?
Here are 10 reasons to engage a business intermediary:
- In-depth knowledge of the tax consequences. There are many ways to sell your business and each structure can have very different tax consequences to you and to the buyer. Knowing what the tax man will require of you under each scenario is critical to your negotiations and to your ability to pay all your obligations and still have cash left over.
- Knowledge of your business and its industry. If included in the preparation process prior to the actual sale, a business intermediary can provide insight into your industry and help you find ways to maximize the value of your business. Most value maximizing strategies will take time to implement. Therefore, it is important to communicate with all of the experts you plan to use during the transaction as early as possible.
- Awareness of market conditions. An M&A professional is constantly involved in the market and learns when the timing is right to buy or sell a business in a variety of industries and to a variety of buyers. Sometimes private equity groups are extremely active while other times corporate strategic acquisitions are more popular. As the economy surges in certain areas, some industries will benefit from higher valuations and more M&A activity. Other times, it will be wisest to stick it out and wait to sell your business if at all possible.
- Marketing your business for sale. Marketing a business for sale involves preparation, analysis, and a unique mix of technical and creative skills. Unfortunately, it is nothing at all like marketing your goods or services.
- Exposure to create competition for your business. You will receive the maximum value for your business when several buyers are competing with each other to acquire your company. A good business intermediary will know who the players are in your market and will be able to craft this competitive environment through research, skillful timing of marketing materials, and deft negotiation.
- Confidentiality. Many times, even the news that you might be interested in selling your business can cause ripple effects that are far reaching and uncertain. How will your key employees react? What will your key customers think? A professional M&A advisor can be engaged in a confidential manner and control who receives information about your interest in selling and with whom they can communicate that information.
- Removal of distractions. Selling your business will not happen overnight and you will be needed to keep your business profitable and growing. If you are spending too much time mired in the details of selling your business you will not be effective at managing it and vice versa. Having a dedicated advisor to work on selling your business will free up your time and energy to continue to run it.
- Emotional buffer. Most of the time, buyers and sellers of businesses will not agree on everything. When that happens, an emotional buffer in the form of a designated negotiator can be extremely helpful to keeping the deal on track. In addition, since the M&A advisor has less “skin in the game”, he or she can be more objective and help you to make decisions based on the facts and not in the heat of the moment.
- Facilitation of the process. The process of selling a business is incredibly complex and involves many moving parts. A qualified business intermediary can successfully bring together attorneys, bankers, accountants, insurance agents, key customers, suppliers, employees, buyers, sellers, and everyone else who may be a stakeholder to make sure their needs are met and the process can move forward. Not having this point of contact generally means the task is up to you.
- Negotiation ability. Almost anything can be negotiated during a business sale. How much working capital will you leave in the business? Will this be a stock sale or an asset sale? Will the buyer assume any debt? Which ones? What is the final closing price? How will the closing price be allocated among the assets? The best M&A professionals are tirelessly working to produce the best possible outcome for you, knowing your goals and needs. They have the skills to negotiate in your favor.
___________________________________________
Etienne Hardre is a Senior Associate with BiggsKofford, P.C. specializing in helping entrepreneurs buy, grow, and sell businesses.
