Whether you intend to sell your business or merge with another, it is essential to prepare for the change. With proper preparation, you can maximize value and make the sale more efficient by shortening the sale time. You will also negotiate for what is valuable to you other than going with what the buyer has to offer. The difference between a prepared seller and one who is not ready can be drastic. Let’s compare:
Exit without Sell-Side due Diligent Preparation
When a seller fails to prepare for the merger acquisition process, the process will take very long and results in an exit cycle. The cycle is time-wasting, thus making the process less efficient. That may end up causing failed expectations or result in a court case.
Exit with Sell-Side due Diligent Preparation
A business owner who is well prepared for sale and has a support team may have a different experience. When the business owner is ready for the exit with due diligence sell-side transaction and consultative advice, will experience material gain. During the process of preparing the transaction gain evaluation, the advisory team may assist in several things, namely:
- Financial reporting corrections
- Discovering better reporting
- Deal structuring and strategy
- Revisit the purchase agreement, among others.
On the sell-side, due diligence involves the finance and accounting staff working with their transaction advisory team and other professionals like bankers, attorneys and developing a proposed LOI. They also prepared the correct information that is to be communicated to the interested and potential buyers. They also prepare any supporting evidence schedules for possible areas of concern. The team also prepares terms that are valuable to the seller.
Well-designed due diligence may improve the sales by 10% to 20%. It also helps in shortening the time taken to complete the sale. Also, sell-side due diligence preparation benefits the seller by shortening the exit cycle and preventing failed transactions.
Exit preparation is thus beneficial in the following ways:
- Prevents potentially failed transactions
- Shortens the sale time
- More favorable deals to the seller
- Improved valuation
- Increased transparency
- Minimal risks
- Increased credibility with investors
- Successful process and
- Better outcome
One of the best ways and the most effective in speeding up the exit process are having more transparent and consistent reporting. It eliminates possible risks for the buyer, thus increasing value for both the buyer and the seller.
However, it is crucial not to confuse transparency and putting your cards on the table before the appropriate time. All it means is to be ready with the support for the buyer by preparing the supporting evidence and identifying possible risks. Early preparation has the following benefits:
- It helps identify and correct any issues before going to the market
- Address any issues in a positive light during negotiations
- The advisory team and accounting team can work together to address any
- Improve performance and prepare for the transaction
If you plan to sell your business, the most important thing is to ensure you understand everything, including the deal terms. You should make sure you have the right team with you. Well-prepared sellers have the upper hand, just like in any other transaction. When you want to seek help, contact sell-side due diligence and quality of earnings and learn how to maximize your value.