Getting ‘House in Order’ Aids Sale Price
Entrepreneur’s Notebook
By LAWRENCE M. BRAUN
Selling a business, like selling a house, takes work,and in uncertain times, the process begins with a campaign to spruce things up.
The key is planning, up to and beyond the end game of maximizing the value you get from your business, including after-tax dollars, estate planning, and continued employment for employees, family members or other shareholders. And, if you own the building out of which you operate, possibly a stream of income from a lease.
The good news is that data on mergers and acquisitions among middle market companies shows that solid businesses still sell on attractive terms.
Dealmakers reported nearly 7,400 mergers and acquisitions involving U.S. companies in 2002, down from more than 8,500 deals the year before, according to FactSet Mergerstat LLC, a research firm tracking mergers and acquisitions in the U.S. and Europe.
The dollar value of the 2002 deals totaled about $442 billion, down from about $683 billion in 2001.
Much of the capital went to smaller, middle market deals, defined by FactSet as deals between $25 million and $250 million. In this arena deal makers announced 1,015 transactions valued at nearly $84 billion in 2002, down from 1,139 transactions valued at nearly $97 billion in 2001.
Clearly, although the number and dollar value of mergers and acquisitions have fallen in recent years, deals still take place.
To be sure, given the potential of war, very few transactions are taking place right now. But as conditions improve, activity will pick up again, and the question now is: How can you position your business to take advantage of the opportunities presented in this marketplace?
Like selling a house, the first step is making the place look good with fresh paint, clean and orderly fixtures in your office and production areas, and the like.
Many other factors are critical:
& #149; Setting sharply defined goals based on a clear understanding of what the word “value” means to you;
& #149; Getting professional management in place;
& #149; Obtaining audited financials;
& #149; Bringing order to all company records and contracts;
& #149; Obtaining top-flight help from investment banking, legal and accounting professionals to assist you at every step.
It takes time and money to get these elements in place,sometimes a lot of time and money. But the payoff is that when you launch a campaign to sell your business, you will already have gone a long way toward establishing its real value and to making your representations about that value credible to your potential buyers.
This, in turn, will free you to spend your time negotiating the things you really value,the real product of the time and labor you put into establishing and growing your company in the first place.
Braun is chairman of the corporate and securities department at Sheppard Mullin Richter & Hampton LLP. He may be reached at a href=”mailto:lbraun@sheppardmullin.com”>lbraun@sheppardmullin.com.
