5 Things Sellers Must Know
to Close a High-Value Deal in 2021
Now is the time to make the deal.
- Act Quickly
- Have Your Financial Information Ready
- Position Your Company for a Strategic Acquisition
- Evaluate Your Cybersecurity Strategy
- Cultivate a Diverse, Inclusive Workplace
Are you positioning your business for a sale in the next 3-5 years? If so, you might want to pick up the pace.
The pandemic threw some curveballs for M&A activity last year, creating a little bit of angst over deal volume in some sectors. But that didn’t last long. Deal volume came surging back to pre-pandemic levels and beyond by the third and fourth quarters of 2020. Those favorable conditions have remained stable in the early months of 2021, and that means now is the perfect time for a sale at a historically high multiple.
The only caveat is that no one can see what the future holds. Ideal seller conditions won’t last forever, and there’s no guarantee that we won’t see a downturn.
What does that mean for you as a seller? It means now is the time to position your business for a strategic sale and make your move.
Let’s take a look at five things you should consider as you get ready to close the deal.
1. Act Quickly
Feel strong, focused, and confident as you begin each day. Take time every morning to awaken both your body and your mind. Do not unplug your phone from the charger and start to answer emails and Slack notifications until you complete a quick mindfulness exercise.
Practice. Take this time to take some sharp breaths – notice your breathing. Take soft, slow, mindful breaths, and notice your mood. Where do you feel your mood? Is this the right mood to take on the challenges of the day?
As the leader of your business, your mood and attitude can influence and affect your employees’ mood. Starting your day with mindful breaths and making adjustments for your day will ensure you and your team are awake and ready for the upcoming business day.
2. Have Your Financial Information Ready
When a buyer is ready to move, they will want to see your financial information immediately. If you don’t have your documentation together, buyer confidence will suffer and you will lose value on the sale. Here’s a sampling of the kinds of information you’ll need:
- Three years of financial statements including profit and loss statements
- Current budgets and sales projections
- Analysis of fixed and variable expenses
- Customer retention rates
- Customer gross profit analyses
- Employee census data
- Documentation of loans and credit agreements
- Company investment details
- Capital structure and capitalization table
- Inventory valuation
- Schedule of fixed and intangible assets owned or used by the company
- Tax returns
3. Position Your Company
For a Strategic Acquisition
There are generally two different types of buyers in the M&A market: financial buyers and strategic buyers. Financial buyers invest in a company so they can realize a return. They are looking at the future cash flow of the company and whether it will be a profitable investment.
Strategic buyers, by contrast, are looking at operational alignment with their current holdings. They typically want to expand their operations so they can gain a competitive advantage in the market. These types of deals usually yield a higher multiple because strategic buyers have stronger motivations to buy. If the acquisition fits well into their structure and allows them to expand into new markets or products, eliminate competition, or shore up a market weakness, then they will be willing to pay more.
4. Evaluate Your Cybersecurity Strategy
It’s easy for this consideration to slip under the radar. After all, your cybersecurity protocols have worked so far, right? But cyber risks are costly, and the buyer will assume those risks when they close the deal. That means that data security issues and gaps in cybersecurity can lower the valuation of your deal. In fact, 63% of CEOS in the U.S. say they are extremely concerned about the threat of a cyber-attack. So what can you do to prepare?
• Have cybersecurity documentation ready to show your buyer.
Like your financial documents, cybersecurity data should be ready to go if you want to preserve buyer confidence.
• Assess cyber compliance issues.
It’s vital that your protocols meet all government regulations and privacy guidelines. If they don’t, take steps to rectify the situation immediately.
• Cultivate risk mitigation.
Take steps to understand and address any industry-specific risks.
• Purchase cyber insurance.
Consider adding cyber insurance to protect against losses in the event of a data breach. This will safeguard the value of your business and make it more attractive to buyers.
Of course, these are steps you should be taking already as you build IT resilience. But they are also essential ways to preserve the value of your deal and position you for a profitable negation.
5. Cultivate a Diverse, Inclusive Workplace
Nearly three out of four dealmakers say that diversity and inclusion (D&I) are important factors in the M&A selection process.
Not only is a diverse workplace important for ethical and cultural reasons, but it is also an important factor in better business outcomes including financial targets and strategic objectives.
As you prepare to sell your business, buyers will want to assess D&I initiatives so they can determine how values align, whether additional training will be needed, and how these policies fit into the overall culture of the company.
Take Advantage of The M&A Market Boom
There is a lot of money to be made in the M&A market right now, and that’s great news for sellers. But M&A is also a complex proposition that requires laser focus and timely action. To close the deal, you’ll need a strong team that can help you anticipate potential pitfalls and seize opportunities.
At CFO Alliance, we have two decades of experience in helping sellers navigate deals and achieve premium multiples. We help you:
- Position your deal for success
- Focus on results that drive value
- Move quickly when buyers are ready to act
- Provide buyers with the financial information they request quickly
- Keep buyer confidence high
As an extended member of your executive team, we help you keep your eye on the prize and focus on the strategic actions that will close the deal.
Contact us today to get the conversation started!
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