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Bear in mind that Mergers and acquisitions are usually time-consuming and difficult. Notwithstanding, these secrets below will guide you through selling your company:
- Mergers and Acquisitions are Negotiable: Most times, business owners get confused on how to determine if a buyer’s offer equals or exceeds the company’s value. This is not something to be stressed about because the terms of mergers and acquisitions are highly negotiable. The outcome of this negotiation depends on the following factors: market comparables (your market position when compared to competitors), valuation used in the last funding of the company, projected company growth, experience and expertise of your management team, etc. Whatever be the case, do not be afraid to negotiate. No matter how good your buyer’s first offer is, propose a counteroffer because buyers rarely make their best offers initially.
- Be Patient, Mergers and Acquisitions Take Time: It is not uncommon for most Mergers and acquisitions to run for a period of 4 to 6 months. The time frame can be dependent on two factors: the urgency of the buyer to complete the transaction and the ability of the selling company to complete the process of selling the company. To shorten the time frame, however, there should be a lead negotiator for the sales, management presentations, merger, and acquisition counsel to advise on potential delays, etc.
- Vetting of the Financial Statements and Projections by the Buyer: Buyers of a company will ask for a presentation of the financial statements of the company being sold per the generally accepted accounting principles. The following would be considered in the projection: the rise or fall of the profit margins of the company, the condition of assets of the selling company, the working capital required to keep the business running, etc.
- Best Deals are Gotten amid multiple Bidders: Among multiple potential bidders lies the greatest deals of all. The selling company is usually at the mercy of the bidder if there is only one bidder. To avoid exclusivity by a bidder, you can set up an auction or competitive bidding process. The multiplicity of bidders places the selling company in a better position to play off bidders against each other till a favourable deal is achieved.
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- Get a Great Merger and Acquisition Legal Team: It is necessary for the selling company to hire outside legal counsels who are not only seasoned in mergers and acquisition but are experts in other specialized areas. These areas may include real estate, intellectual property, international trade, data privacy, etc. You can’t do it alone because the merger process involves multifaceted agreements, deal structures, and challenging legal issues.
- Refuse to get Trapped at the Letter of Intent Stage: Most selling companies are quick to sign the letter of intent believing that they are preliminary documents that should be quickly processed to get to the next stage. The fact is, a selling companies bargaining is at its peak before signing the letter of intent after which the leverage swings to the buyer. The terms to negotiate in the letter of intent includes the price and how it will be paid, the non-binding nature of the contract, the length, and scope of the exclusivity provision, etc.
- Understand the Dynamics of the Negotiation: Merger and Acquisitions negotiations require compromises therefore it is important to understand which party has the upper grip on the negotiations. You need to find out if there are other bidders that can be played against each other if you have an experienced negotiator by your side, who is more interested in the deal – the seller or the buyer etc.
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