Things to consider before selling your company (I). Focus: the business
Preparing a company for sale is as important as the sales process itself. Can we sell the company without that? The answer is certainly yes, but in general, it can hurt the process.
A bad preparation/planning can hinder or even break negotiations, reduce our negotiating power and most probably we will get less value than expected. Also, bad planning can probably increase the fiscal cost of the operation.
Business related measures
These are the basic actions that the company should execute before starting a sale process:
- Analysis and improvement of financial statements.
It is essential to have a scrupulous structure on all financial information that will serve as a tool for the valuation and negotiation of the final price of the company. It is important to distinguish income or expenses that are not directly related to the business activity. The final objective is to be able to show potential investors the EBITDA adjusted so that the company value is in line with the reality of the business activity.
- Sales structure.
To the extent that it is possible to prepare the company to focus as much as possible on the sales of those products/services that improve its EBITDA. Are we exporting, can we promote star products or internationalization in the short term? In general terms, investors are interested in companies with international expansion, recurrent products with high margins and long-standing customers.
- Analysis and execution of short term investments that can improve the company, from image to productivity.
Simple actions that improve the image of the company (cleaning, painting, automation of some manufacturing or sales process, updated web, active social networks).
- Having the necessary human resources so that in the event of a sale there can be a credible transition process.
Management team independent of the property. In this area it is also important that all those labour conflicts are solved or in the process of being solved in the short term (false self-employed, retirements, …)
This way, these would be other aspects of quick verification of the typical attributes that buyers look for in an acquisition.
- Clear, simple and convincing vision, strategy and business model. In-depth knowledge of the sector; its trends, customers, suppliers.
- Photo and clear description of the company’s strengths and weaknesses. Clarity and honesty are key, especially in those operations with earn-out structures.
- Clear picture of the growth potential in a growing market: this means that growth is not only based on gaining market share from competitors.
- Well-defined culture and values; this is evident in behaviors and results, such as strong staff involvement and low staff turnover.
Legal and fiscal measures to be analysed before the sale
We advance some of the most remarkable ones, although in our next article we will analyze this point in more depth.
- To have an adequate separation between what are goods of use of the partners and those that are purely necessary for the society.
- Clear and orderly asset structure.
- Enhance fiscal stimuli.
- Up-to-date corporate documentation and contracts.