Everyone wants to sell their business at a high price. Who doesn't want to maximize the value of their company right? But to negotiate in your favor, you have to have leverage. Otherwise, you're just hoping to get lucky that someone will be willing to pay for what you are asking.
So how do you get leverage? Michael Frankel, SVP and Managing Director, Deloitte New-venture Accelerator, teaches us how to maximize our business's value prior to sale. He has done about 110 M&A deals, written three books on M&A, and has seen M&A from every angle.
"There is nothing more disheartening and difficult than having a failed MNA process." - Michael Frankel
According to Michael, a failed M&A process can be catastrophic to your business and to your people who just found out that you are trying to sell your company. This is why preparing your company for sale is so important, because it will increase the likelihood of an effective sale.
Also, preparing effectively for a sale is the single most efficient leverage point to increase the value of all the work you put into your business. This is why waiting until you're ready to sell is a bad idea. Even though you can decide when to sell your business, that might not be when buyers want it. They might come early, and you need to be prepared. M&A is your most likely exit, and since you are eventually going to sell, you might as well prepare.
One of the best things you can do to maximize your business's value is to see the deal from the buyer's perspective.
The buyer doesn't know everything about your business, and when in doubt, they will assume the worst. All of these negative assumptions will translate into a decrease in price. The more you can demonstrate to them that their assumptions are wrong, the more they're going to pay you.
Another thing that the buyer is concerned about is the integration risk. A lot of this is about how prepared your business is to become a part of something bigger. It would be best if you showed them that they could absorb your business and benefit from it.
Lastly, anything broken is much more expensive for a large buyer to fix than a small company. So this comes down to self-awareness. You need to determine flawed processes and fix them before they ever reach the buyer. Otherwise, it will also drive your price down.
If you want a step-by-step procedure on effectively preparing your company for sale, how to find natural buyers, closing advice, and more, check out Michael's course below.