To sell the company successfully, sellers’ preparation is critical. Many sellers are very close to the business for sale and have difficulty looking at the business from a buyer’s perspective, making it difficult to clearly understand its value.
Therefore a robust divestiture plan can help sellers successfully exit their business in a shorter time frame, avoid sale price erosion at the negotiating table, minimize distractions to the core business, and ultimately derive the desired value from the sale.
From sellers’ perspective, one way to avoid value erosion is to design and implement a process that results in rapid deal completion. The process we recommend encompasses the following:
- Plan ahead
Sellers should set the goals of the transaction, develop a detailed plan, and determine the scope — what is for sale and what is to keep.
- Present financial information tailored for the deal
Sellers should describe their businesses for sale in a clear and cohesive manner. Sellers should know the required information in M&A deals ahead of time and prepare to bridge any gap. Also, sellers should anticipate the potential need for carve out audited financial statements.
- Explain the gaps
Sellers should identify any potential issues and opportunities and anticipate questions and requests from buyers. These issues could be related to operational and/or financial aspects of the selling entity.
Sellers should also validate forecast assumptions and bridge the forecast and historical results, if there is a gap. Sellers should also prepare to provide stand-alone cost estimates.
Finally, sellers should plan for key terms in the purchase agreement to maximize value and minimize liabilities.
- Clean execution
Sellers should work with their advisors closely to manage the whole process, draft any additional documents, such as transition service agreements, structure the deal in a tax favorable way, and stay on course.
Only the most prepared will win big. The stakes are high in merger and acquisition transactions. The sellers who win big and quickly are always those who present their businesses most effectively, who address issues early on, who answer challenging questions, and who stick to the game plan.
Lei Jiang Law Firm provides quality Merger and Acquisition legal service to clients. From more information, please contact us.