So, someone has approached you to buy your business. It is unexpected and out of the blue. What should you do? In Step 1, I suggested you meet the acquirer and decide whether his vision suits you and whether you like and can trust him.
In Step 2, I suggested it is time to get close to appoint an experienced Mergers and Acquisitions Adviser who knows your market and your business.
In Step 3, I suggested you decide what you want to do and what you want to get out of it.
Now let us assume that you have decided to pursue a deal with this single acquirer ….. the chemistry is right, the strategic imperatives make sense and you and your advisor feel you could get a decent deal out of it.
Step 4a – Get your financial information ready; involve your accountants
- Then get your accountant involved; make sure your management accounts are up to date, get the last financial year’s accounts and tax returns completed and ready for filing, prepare a detailed budget and cash flow forecast for the next year, together with forecast balance sheets. Prepare a long range summary budget (3 years).
- Ask your accountant for his view on the value of your business. This will be one view of the value of your business, but unlikely to be the one you end up getting.
Step 4b – Get your non-financial information ready; involve your Board
- Update or prepare a clear and concise Business Plan. Your M&A Advisor will use this to create and Information Memorandum if you decide to seek competitive bidders at some future date.
- Review your management team; is there a person or team who will provide the necessary succession – this will determine how long you will have to work for
Step 4c – Get ready for sales action, guided by your M&A Advisor
- Prepare a “pitch” of what your business will do for the acquirer (the M&A Advisor will assist)
- Agree a range of valuation that works for you and within which you think the buyer could be persuaded to stretch
- Agree the terms which will work for you – split between guaranteed consideration now and later and contingent (such as earn-out) consideration and whether or not you would be prepared to accept shares in the acquirer instead of cash.
Step 4d – Get ready for due diligence action, guided by your M&A Advisor
- Even of the deal does not proceed to agreed terms, this will be a useful exercise in putting your house in order.
More to follow next time. Please feel free to get in touch with me at firstname.lastname@example.org or on 07904 766230, or for more information, please check out my websites at www.klopartners.co.uk and www.peterkroeger.com