There are many variables to factor into your decision, here are a few often missed
When you start thinking about what the timing should be for selling your company, there are many variables to factor in. Too often, there are key variables missed and it definitely negatively impacts the deal process or the deal valuation.
1. - Areally bad day is when you attract an acquirer to consider buying your company and while they are doing their due diligence, your monthly revenue (and/or profit) is going flat or even declining versus recent prior periods. Now the acquirer’s due diligence has to probe what’s happening and why it’s not continuing an upward trend. This variable should be factored into your exit timing decision and you want to exit when you are forecasting a solid growth period during the acquirer’s due diligence period.
2. - During the due diligence, the acquirer points out you have a key customer or supplier contract soon coming up for renewal and the renewal is key to the ongoing business. This could be viewed by the acquirer as a meaningful risk to them and now the deal they offered is being modified to protect them from the potential risk. Build a calendar of key contracts and their renewal dates so you can see how their timing might impact your exit timing.
3. - You are ready to sell but your business has one or more key roles in the company either open and/or with a key employee about to retire. You’ve read here in prior postings that an acquirer many times is investing more in the jockey than the horse. Your team is the jockey that the acquirer will be adopting, and during their due diligence they will look to see the strength and stability of that team. Trying to exit while you have key open positions unfilled or key personnel soon to retire could signal potential risk to the acquirer. It may not reduce their desire to acquire your company, but it may impact the purchase price or deal structure they offer.
Here is the bottom line. There are mutliple variables for deciding when to sell your company. Too often the driving variable is the Seller simply wants to move on and that’s fine. But other variables must be factored in. When preparing your company for a future sale, you want to minimize or eliminate risks that the acquire will see during their due diligence. The more risks an acquirer believes there are in purchasing your business, the lower the purchase price and/or the worse the deal structure will be. Begin thinking about ALL the variables that should go into your decision as to when is the right time to sell your company. Doing so could mean the difference between a euphoric or less than euphoric exit.
