So far, so good: You've built a scalable company with a
strong growth strategy, you have immaculate accounting and audited
financials, and you've started negotiations with two big public
companies. The payoff seems to be just down the road.
Hang on. While you've been focused on selling the company,
who's been making sure the company stays focused on selling
your product? "The last thing you want is a financial or
operational hiccup during negotiations," says Freedman. Many
deals have been quashed when financial results from the last month
or the last quarter are off target. Even if the buyer doesn't
walk away, the price is likely to take a last-minute tumble.
Freedman points out that, in a sale, the company is the product.
"If you take your eye off the ball and focus only on selling
the business, in the end, you won't have a great product to
sell."
Diligence and Disclosure
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The sale of a business is inevitably as complex as the business
itself. If the business has 10 years of operating history, then it
has 10 years of potential liabilities, lawsuits and bad accounting.
Even for a relatively simple business, buyers want to know exactly
where the business stands. That means the seller has to disclose
copious amounts of documentation and give a strict personal
guarantee, called a warrant or representation, that all disclosures
are complete and accurate. "If there's any hair on the
deal-any red flags-it's going to come out. So you're best
disclosing everything upfront," says Agrawal of VisionQuest.
"Don't play any games." The quickest way to unravel a
deal is to leave a buyer feeling duped.
The amount of disclosure that buyers require can be
mind-boggling. Putting it all together in a reasonable fashion is
just one reason to consider hiring outside help. An intermediary,
such as a business broker or an investment banker, can relieve you
of some of the work while also keeping the buyer engaged. "We
always recommend that a third-party intermediary represent
you," says Minor. "Even if a large competitor makes a
direct offer, I'd still bring in an intermediary who can drive
the valuation up."
The seller's dream team of advisors should probably include
an investment banker, a CPA and a battle-hardened transaction
attorney. A good transaction lawyer will help you get the deal
done, while more conservative corporate attorneys may get bogged
down in the negotiations and end up killing the deal.
Selling a business is not something you do every day, and it may
well be the most important transaction of your life. It's
vitally important to use professionals who will push to get the
deal done while looking out for your best interests.
The Final Stretch
Remember, no deal is a sure thing until it's done. Perhaps
the only sure thing is that selling a business is never simple.
Selling out can be the most harrowing-and most rewarding-experience
in the life of an entrepreneur. Take it slowly. With careful
planning, strategy and guidance, each step of the process can add
value to the company and get you closer to crossing the finish
line.
Greener Pastures Ahead
Selling a business can take you down the path to
wealth...or the road to disaster. What better way to prepare your
business than by following in the footsteps of someone who has done
it before?
Joe John Duran, a chartered financial analyst, is a worthy
guide. In his new book, Start It, Sell It & Make a Mint: 20
Wealth-Creating Secrets for Business Owners (Wiley), Duran
draws a clear road map to wealth for any business owner. Duran was
a partner in Centurion Capital, an investment management firm that
he and his partners sold to General Electric in 2001.
In the opening chapters, Duran describes himself as a
"quite average" kid growing up in war-torn Zimbabwe. In
fact, Duran and his book are anything but average. The book is a
compelling story of personal adventure, beautifully intertwined
with concise advice on building and selling a business. As the book
maps out Centurion Capital's many stages of growth, Duran
guides readers through the key factors and decisions that shaped
the company. His insights are applicable to new and growing
companies in every industry.
Start It, Sell It & Make a Mint gives entrepreneurs
Duran's 20 secrets to business success, with vivid examples
from his own experience. Secret number 21: Buy it, read it, and
make a mint!
is an investment banker and author of the e-book
Finding Funding.
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