Selling your company
In today’s competitive world, profit and growth are fundamental sources of value creation for business owners and shareholders. If you don’t grow, your competitors will, and they might eventually dwarf and endanger your business. Even if you have carved out a profitable niche for your firm, nobody is immune from the disruption of technology innovation in a rapidly changing ICT industry.
Many ICT companies have been founded 20-30 years ago. Sooner or later, the founders will need to address the question of their own succession. While multiple approaches such as MBO, MBI and OBO are possible, selling the business to a larger group is often the more attractive option.
More often than not, business owners vastly underestimate the complexity of selling their company, for lack of previous experience. Truth be told:
- The time it takes is more likely to be 6-12 months (or longer) rather than 3-5 months;
- The transaction price has to be consistent with the valuation levels currently witnessed in the market;
- The eventual buyer might not be one of the ‘usual suspects’ that the company’s owners have on their radar.
The real challenges of an M&A transaction
Selling your business is a once-in-a-lifetime undertaking that shouldn’t be left to chance. Professional support provided by M&A experts who understand the business in a holistic manner and can manage the process from the beginning to the end is key to a successful transaction.
Based on our long-time experience in Mergers and Acquisitions, we believe that the true challenges of M&A engagements are:
- Making your company ready for a potential M&A transaction: even if the shareholders are ready to sell the company, the company might not be ready to be sold! The first step is about presenting the company in the best possible light. Does the company have a clear strategy and a good marketing story? Does the company’s website convey a positive image of the business? Is the company consistently profitable? Are the company’s revenues stable or growing? Does the company have a simple and lean legal structure? Has the company prepared a professional and convincing Information Memorandum, in order to help market the business to prospective buyers?
- Finding the buyer that is right for you: while business owners often articulate what the ideal buyer should look like, the M&A advisors is here to create demand in a structured and systematic manner. There are many options: Industrial player versus financial investor with a build-up strategy; national player versus foreign buyer; player with the same positioning in the value chain or from an adjacent industry or niche. Needless to say, a positive chemistry based on affinity, trust and mutual respect between the sellers and the potential buyers is key to getting traction and converging towards a satisfying outcome.
- Negotiating a fair transaction price: Sellers, having invested many years and even decades of their life in their company, often have a biased view of the true value of their business, and price expectations that are not aligned with the current market prices. Buyers on the other hand, whether listed or not, will argue that they cannot pay more than the way the market is currently valuing their own firm. The sell-side M&A advisors will help their client get the maximum value out of the transaction, but also help build bridges between sellers’ expectations and proposals received from buyers.
- Maintaining momentum all the way to closing. M&A transactions have a tendency to drag on for longer than they could. While Due Diligence need to be undertaken thoroughly, maintaining the pace in the negotiations is key to success. The M&A advisors are here to ensure progress in the overall process, from pre-LOI negotiations, through Due Diligence, and all the way to the signing of a Share Purchase Agreement.