PART 3 - Contemplating a Sale or Merger? What are some additional issues to consider?

In this third and last installment of our series (click here for part 1 or part 2) on why and how to hire an investment banker, we will take a look at some additional issues you may wish to take into consideration.

1) Experience in presenting your company. One of the classic mistakes that sellers make is simply responding to inquiries by suitors. There is a better way to sell and maximize the value of your business. The seller should be running the show and presenting the company in the most favorable light. The actual process of selling the company helps to ensure that the buyer is the right buyer and not simply the first one to make a serious inquiry. MidCap Advisors employs a rigorous approach to the market that few company owners could replicate.

2) Proper planning and business structuring. Anticipating these details eliminates much of the uncertainty that can jeopardize a sale or diminish the perceived value of your company. How much cash should you have on hand? What about recasting previous years' accounting results? Should you account for inventory with FIFO or LIFO? How do you give a buyer comfort with your team, methods, results, and stability of employee and supplier relationships? Do you have audited financials, employment contracts with noncompetes, and supplier and customer contracts?

Also, by resolving lawsuits, employment disputes and tax issues prior to the sale, the buyer does not have to wrestle with thorny issues that could lead to the buyer's disenchantment with the business. Pre-sale consulting and preparation could be valuable for you if you have not addressed these issues. MidCap Advisors' Ownership Transition Planning practice has the potential to enhance the value of your company by reducing the perception of risk that is associated with smaller, less organized firms.

3) Preparation of Offering Memorandum. An Offering Memorandum is a document created to provide prospective buyers detailed information on your company. Producing the offering memorandum is a tedious chore, both labor and time intensive, and often requires access to expensive databases. An experienced investment banker and analyst team will produce a higher quality product, reflecting professionalism and enhancing perception of value to prospective buyers, while retaining important information that should not be revealed until the due diligence process begins.

4) Signal Prospective Acquirers. How do you let buyers know that you are not just testing the waters, and potentially wasting their time? Engaging a reputable investment banking firm to represent you to prospective acquirers is a signal to the market that you are serious and have started an organized, professionally managed process. An unrepresented seller is perceived much like a legal defendant with no attorney.

5) Anticipate problems and issues. Most company owners sell only once. There is no substitute for the experience of several transactions in shepherding the deal to a successful closing.

6) Facilitate due diligence off your premises. MidCap Advisors offers a virtual data room to save you time and minimize staff interruptions before the transaction is consummated.