7 Recommendations when Selling a Company

Have you built a successful company and now you want to sell it and capitalize years of hard work? If you want to get the maximum price, follow the recommendations below. According to our experience, majority mistakes originate in failure to respect basic sales process rules and practices. Quite frequently it is caused mainly by underestimation of preparation for the sale. You have been building the company for 5, 10, 20 and sometimes even more years, however, you will sell it only once. Below are seven most important paragraphs for your homework.

1. Be Aware of the Time-Consuming Nature of the Sale of the Company

It is difficult – from all angles - to complete the transaction in the M&A field and great patience is needed. Preparation of the company alone may last for several weeks, however, sometimes also 1 to 2 years. It is necessary to keep it in mind since the very beginning. It is possible to manage it faster, however, when hurrying you will have to compromise a lot. And due to these compromises you may often sell it for a lower price.

2. Get a Picture about the Value and Price of the Company

Owners know their companies best. However, when you ask them what value their companies have according to their opinions, they often do not know. In the best case, their expectations are absolutely unrealistic. If you decide to sell your company, get at least a general idea about its value. You do not have to arrange for a detailed expert report, however, let an expert produce a general appraisal. In the case that the sale is being arranged for you by a consultant specialized in company acquisitions, he will usually help you to arrange for the first “appraisal” of the company. It is not expensive and, moreover, you will identify other issues or problems which should be better solved prior to commencing the sales process. 

3. Sweep out Skeletons from the Cupboard and Follow “Backlogs” through

Finish uncompleted forgotten tasks or problems which have not been solved for years. It may comprise only financial statements depositing into the collection of documents, completion of the final approval process concerning a production hall or extension of a contract with a key supplier. It takes time, energy and often also money, however, it will pay off. Otherwise you will have to compromise at most inconvenient moments. And to reduce a price or assume unpleasant warranties towards a buyer. 

4. Create the Competitive Environment among Interested Parties

When carrying out your business, you were applying the rule yourselves that the best selling price can be achieved in the case of existence of the highest possible number of interested parties. Company transaction is nothing else. You will achieve a better idea about your position on the market and you will even have a possibility to choose. If you start negotiating with one interested party only, you are closing the space for negotiations. An experienced buyer would get you into a disadvantageous position. Especially if he knows that he is the only interested party. Try to delay conclusion of the agreement on exclusive negotiations and keep him believing that he is one of many for longest possible time.

5. Conclude a Non-Disclosure Agreement (NDA) in Time

When selling a company, you will have to provide confidential information and source materials. It is always necessary to protect them consistently in the event of failure of a deal. There is nothing worse than to provide know-how and confidential internal information in principle free, for example even to your biggest competitor. A well-prepared NDA should prevent it, or to minimize the space for misuse of confidential information.

6. Transaction Team is the Root

Your business experience alone does not guarantee that you will successfully get through the whole sales process. You have been building the company for 5, 10, 20 and sometimes even more years, however, you will sell it only once. The process has a number of aspects, commencing with law, taxes and finances and ending with setting the sale. Compile an experienced team and do not forget clearly specify responsibilities and competences of individual members. The transaction team has to be harmonized and has to run perfectly. And first of all, do not forget: each team must have its head who will have a key say and main competences and responsibility for managing the whole sales process.

7. Be Prepared for High Tempo – Transaction Process Has Its Own Dynamics

Sale of the company (or any similar transaction in M&A field) is an endurance race. It does not have a sense to start sprinting and fall out of the race after 100 metres. On contrary, the main thing is not to lose a contact and, if possible, to set the pace of the race. It is necessary to stay alert and ready all the time. As is often the case, the essential terms of the transaction are being changed only during the last hours or even just before signing the contract on transfer.