Successful Business Exit Solutions Require Careful Planning
Understandably, the decision to sell all or part of a company can often be a difficult one. However, implementing that decision could be even more challenging unless the seller has planned each step of the process in detail. The biggest mistake that most first-time sellers make is to assume that the exercise is much the same as selling a house – simply assign the job to an agent and wait for the offers to roll in. Unfortunately, planning and implementing successful business exit solutions is a far more complex task and completing it is likely to take much longer than most owners expect.
Making a sale entails more than merely obtaining some signatures on a contract and paying a nominal purchase price into the seller’s bank account. Any reasonably competent estate agent or business broker might be able to achieve that much if given sufficient time. In practice, the success of a deal will be determined by the value and risk that underpins the purchaser’s valuation, along with the terms and conditions governing the signed contract. Let’s examine the various steps involved in preparing and executing an effective business exit solution.
Firstly, when selling a house, one would generally begin by deciding on an asking price, knowing that it will probably be necessary to compromise to finalise the deal. When setting that price, an agent bases the figure on recent sales of similar homes in the same area. However, when determining the value of a privately-owned business, there are no market standard valuations to guide the seller. The actual value of a company is whatever it appears to be from a potential purchaser’s perspective. Ensuring that valuation will meet or, where possible, exceed the seller’s needs is among the main objectives of planned business exit solutions. Experience has shown that allocating that responsibility to a mergers and acquisitions (M&A) advisor is invariably the best way to guarantee a favourable outcome.
Finding the right buyer is critical to a successful deal. The most effective strategy will be to identify several parties that could benefit from the purchase to encourage competition. The task is primarily a marketing exercise. Therefore, it’s best handled by a company with proven skills in this area and access to clients with a known interest in acquiring or investing in a going concern. A mutually beneficial business exit solution will depend on identifying the buyer or investor who has most to gain from the transaction.
There are several reasons why someone might want to acquire an existing business, with the most important being growth. For example, the buyer might wish to access new markets. Many overseas companies have expressed strong interest in exploiting the growing demand for their goods or services in South Africa and other parts of the continent. Given the lack of local interest in mergers and acquisitions, most opportunities to negotiate lucrative business exit solutions currently depend on convincing those overseas buyers of the benefits they stand to gain.
Surprisingly, one advisory service in South Africa has developed a uniquely effective strategy that often sees buyers making an offer even before reviewing due diligence. Deal Leaders International is one such M&A advisor with extensive acquirer and investor networks both locally and abroad. The company has earned an enviable reputation for negotiating practical and mutually profitable business exit solutions.