The Check List for a Successful Company Sale

By: Michael Fitzgerald

We spend a lot of time talking to business owners about what to expect during a sale transaction. For most, this their first time selling a company, and the amount of effort and detail involved can seem endless. And then there’s the emotional adjustment. Giving up control of a company that has been built through years or decades of hard work, sleepless nights, and enormous investment in personal relationships with employees, customers, and business partners is a huge shift in mindset.

At MidCap, we’ve developed a few recommendations to help business owners prepare for a sale and the transition period that follows:

  • Engage early with advisors. Engaging with experienced M&A advisors early in the process is mission critical to ensure a successful transaction. An experienced investment banker, commercial transactions attorney and a corporate accounting professional are three key advisors sellers must have on board early in the process. These professionals will provide valuable market insights, help assess the company's readiness for sale, and guide owners through the complexities of the transaction landscape.
  • Talk to someone who’s been there before. Spend time with peers in your network who have been through a sale process. It can be enormously helpful to have different sounding boards, especially other business owners who can speak from experience when you’re faced with difficult decisions or strategic inflection points.
  • Get your financial house in order. Preparing detailed and accurate financial records prior to embarking on a sale is essential to achieving the highest valuation for your company, and will be required during the due diligence process. A thorough and transparent financial presentation is crucial for attracting potential buyers and instilling their confidence. Key documents to include are financial statements, tax returns, and projections that reflect the company's growth potential.
  • Maintain confidentiality. Avoid prematurely disclosing the potential sale to employees, customers, or suppliers. Premature leaks can lead to uncertainty and potentially harm the business or put the transaction in peril.
  • Discuss a realistic valuation range with your financial advisor. While optimism when selling a company is healthy, overestimating the company's valuation can be a major deterrent for potential buyers. Instead, work with an investment banking firm to conduct a thorough valuation analysis and agree on a realistic price range that reflects the company's accurate market value.
  • Prepare for a thorough due diligence process. A sound due diligence process is absolutely critical to a successful business sale. In addition to the financial information mentioned above, be prepared to provide detailed customer, supplier, legal, and employee information. Buyers need to have a clear understanding of the upside potential as well as the downside risks of acquiring a business.
  • Conduct your own due diligence. While the buyer will be seeking transparency in determining if the company is an optimal fit for acqusition, the seller should be conducting as rigorous a process to ensure the acquirer is financially sound and ethical and that the corporate culture of both companies is aligned. Failing to consider these questions upfront can jeopardize a deal, or lead to post-sale seller’s remorse.
  • Plan for life after the sale. A post-sale plan is critical to a successful outcome. Whether it involves transitioning key employees, managing tax implications, planning one’s next profesisonal next chapter, or thinking about how you’ll spend time with family and friends, neglecting post-sale considerations can lead to unforeseen challenges that can be costly, both financially and emotionally. For many business owners, these are conversations to have not only with your advisors, but also with your peers and family members, before, during, and after the sale.

So, while a business sale is complex and brings with it tremendous change, a strategic and well-executed plan can help business owners avoid potential pitfalls that can threaten the transaction or lead to a suboptimal outcome. By following these guidelines, business owners can position themselves for a smoother and more lucrative sale and post-sale satisfaction.