How to maximise business sale value with the right buyer

Key Takeaways

• Evaluate buyer quality, strategic fit, and timing before starting any negotiated mergers and acquisitions (M&A) deal
• Private companies can boost valuation by reducing risks and validating assumptions and deal structures early
• An experienced M&A advisor team can help manage negotiations, maximise deal terms and increase certainty of closing

Don’t go it alone

As business owners are driven by seizing opportunities, it could be tempting to pursue a specific acquirer. Even if you’ve sold a company before, it’s rare to maximise business sale value and secure superior deal terms without expert guidance. Vetting buyers and negotiating major deals demands deep expertise and understanding of complex transaction dynamics.

Consider the following when one or more potential suitors approach you:

1. Buyer quality

• Can the acquirer close the transaction efficiently?
• Are they likely to renegotiate?
• What is the organisation’s procedure for internal approval?
• How will the acquisition be funded?

2. Valuation

• How does the proposed purchase price and deal structure (e.g. cash at closing, earn-out, seller note) compare to fair market value?
• What approach did the buyer use to determine their valuation range?
• Have you accurately calculated and supported your adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA)?
• To what extent does the purchase price reflect the buyer’s expected synergies?
• Could another buyer potentially pay more for your business?

3. Deal terms

• In addition to purchase price considerations, what are the proposed terms for other important commercial provisions? (e.g. indemnifications, escrow amounts and timeframes, non-compete agreements, post-sale employment, net working capital, etc.)
• Are they in line with market benchmarks?

4. Deal structure

• Have you determined the optimal deal structure? (e.g. share vs. asset sale)
• How can you mitigate the tax impact of the transaction?
• Have you considered any pre-sale personal tax planning?

5. Risk elements

• Have you identified and mitigated potential buyer concerns or issues?
• Risk elements, such as business mix, regulatory compliance, tax exposure, litigation and environmental considerations may jeopardise a transaction

6. Fit

• What is the acquirer’s strategic rationale for pursuing this transaction and how does it align with their long-term goals?
• Is there a strong cultural fit between your organisation and the buyer?
• How committed are they to preserving your legacy and what are their plans for retaining and supporting management and employees after closing?

7. Timing

• Is the timing for a deal appropriate considering specific industry dynamics, the company’s outlook as well as M&A activity and the state of the broader economy?
• What is your exit time horizon?

8. Personal goals

• What is your exit strategy? (e.g., sell to a third party, transition to family or management buyout)
• Have you determined the amount of capital you will need to retire comfortably?
• Do you have a continued desire to grow the business or is your focus on transitioning out?

9. Internal team

• Have you identified who within the organization to include in the process?
• Have you carefully considered the appropriate timing for informing key employees (e.g., the internal deal team, finance, operations, HR) to balance confidentiality with effective preparation?

10. Advisor team

• Have you assembled the right team of advisors, including an M&A firm, legal counsel, a tax specialist and financial planner?
• Who will quarterback the entire sale process, help you control the narrative, anticipate and resolve deal issues while you focus on running the business?

Why partnering with an M&A firm strengthens negotiated deals

Hiring an M&A advisor helps you:

• Maximise value
• Secure the most favourable terms
• Achieve your non-financial objectives
• Complete the transaction efficiently
• Avoid becoming entangled in a process that ultimately fails to close

An experienced advisor manages and orchestrates the entire deal cycle, guiding you through due diligence, negotiations and every step in between.

Here is how an experienced investment banking team adds meaningful value to a negotiated sale:

Multiple deal options

An astute corporate finance team can quickly identify and contact several other capable strategic acquirers, including those you are aware of and those you never knew existed.

Negotiating abilities

While you may be skilled in negotiating transactions for running your business, the M&A advisor is better positioned to work on your deal and garner the highest value and best terms for your business.

Buffer between you and acquirers

Staying focused to keep your business growing and profitable is crucial during the marketing and sale process. Further, selling a business can stir up a lot of emotion. Let professionals lead negotiations on value, terms, and key issues throughout the transaction process.

Early warning system

The right corporate finance team is skilled in recognising when the other party is not sincere or when the certainty of closing a deal is low. You do not want to waste time on a suitor who is displaying low odds of completing a successful deal.

Guidance based on market trends and dynamics

Understanding current market value and terms is key to achieving a premium purchase price and deal terms. An effective team can identify and convey hidden value to buyers and calculate the appropriate adjusted EBITDA and other financial metrics to help you receive a premium to market benchmarks.

Creativity and resourcefulness in resolving deal issues

Anticipating business issues that are likely to arise in due diligence and preparing management to address them will reduce the risk of a broken deal. Since few businesses have no shortcomings, challenging issues that arise either before or during due diligence often require investment banking creativity to resolve.

Maximum deal control to your advantage

The deal journey can be formidable. Investment bankers are skilled at controlling the sale process and driving to the closing date.

Why expert guidance makes all the difference

In conclusion, receiving an unsolicited approach to buy your business can be both exciting and overwhelming. While the opportunity may seem promising, navigating the complexities of valuation, deal terms, and strategic alignment requires careful consideration and expert guidance.

To maximise business sale value, partner with a seasoned M&A team that aligns your financial and personal goals with market dynamics. By leveraging their experience, market insight, and negotiation skills, you can transform a potential acquisition into a successful, well-structured transaction – one that protects your legacy and positions you for the next chapter.