There’s been a flurry of merger and acquisition (M&A) activity in the past few years. Many expect this trend to continue.
Why? Several factors are at play – a strengthening economy, low interest rates, and a generational shift. Many baby boomers are aiming to cash in their companies for a rewarding retirement. But this isn’t a do-it-yourself project.
Whether you’re selling your business or planning to buy one, it’s essential to assemble a competent and experienced team. This team can guide you through the process and help you avoid costly mistakes.
Key players on your M&A team include:
Business valuation experts
Business valuation experts are uniquely qualified to put a value on your business. If you know what your company is worth, it’ll help ensure you don’t sell for too little, go to market too high, or pay too much as a buyer.
Understanding the key drivers in a business valuation can also help you spot areas for operational improvement so you can increase your company’s value for a future sale.
If you’re selling to family or the management team, a business valuation can ensure a fair price is paid and supported to the IRS.
Accountants with specialized experience in M&A
Your financial and tax accountants will assist with financial due diligence, help you clean up your financials so you’re well-positioned for a sale, and advise you on structuring the transaction.
Each of these items helps maximize your proceeds.
Lawyers with specialized experience in M&A
Buying or selling a business is one of the most important financial transactions of your life.
You may already have a trusted lawyer for other legal concerns, but you should also hire a lawyer or law firm that specializes in M&A transactions for this business deal.
They’ll assist with the legal aspects of the negotiation and guide you through the due diligence process. Your lawyer will also draft the purchase agreement and set up any resulting business entities to maximize tax and legal advantages.
Business brokers/investment bankers
Business brokers or investment bankers can help buyers and sellers, separately, through the sales process.
As a seller, you can count on your business broker or investment banker to identify and prequalify potential buyers, market your company, ensure confidentiality, assist with negotiations, and facilitate the sales process.
As a buyer, you should request an intermediary’s help to identify businesses that meet your criteria and goals, present purchase offers, and assist with negotiations and due diligence.
Bankers or other financiers
If you need external financing to fund the deal, you’ll need a banker who’s experienced in financing M&A deals. A banker lends funds, but can also help think through any risk mitigation and due diligence issues.
Typically, small business owners have the majority of their net worth tied up in their businesses. When they sell their company, they need a solid plan to allocate the proceeds.
Hiring a financial advisor is a smart move. Why? Because an advisor can educate you about different investment options. You can rest assured that the money you earn from the sale will grow and be protected.
Even with a powerful M&A team on your side, you should prepare yourself for a potentially emotional and frustrating roller coaster ride.
Usually, deals involving the sale or purchase of a business come together and fall apart several times before they’re finalized.
However, hiring the right team of experts can help you eliminate bad deals, avoid mistakes, and secure the right deal for you and the business.
Have questions about assembling your M&A team? Let’s talk!