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Deal Readiness

Its good to meet businesses well before they are ready to sell, so we can help form strategy, and help them to get in shape for the deal when it comes.   Here’s eight things to think of when getting “deal ready”

1.       Plan early at high level and in detail.  At high level : think about when you expect a deal to happen, what obstacles are in the way.  How must the business change to achieve your exit?  Do you need to raise funding meantime to invest and grow?  At a tactical level when in the year would be a good time to do the deal, usually this will be influenced by any seasonality in the business, or by how certain you are that your budgeted result will be delivered. 

2.       Communication This is difficult, while it’s important to give staff a sense of purpose and a share in the direction of the business, elements of the exit plan must necessarily be kept secret until implemented.    Of course if you are thinking of selling the businesses to a management buyout team – that process needs careful handling – I usually say either fully encourage it within well defined ground rules or forbid it – an ambiguous support risks alienating the key people in the business.  Closer to the deal you need to think about who should be told shortly before or after – key customers, suppliers, shareholders as well as staff.  Also what do they need to be told?

3.       Build your team whatever the plan a good management team is key.  If you want to sell to a private equity house, or a debt funded MBO you need to have a good top team in place, well enough ahead to be bedded in and credible.  The chemistry amongst the team is important – I’ve met lots of owner managers for example who have hired an apparently good top level manager only for them to fail the “fit” test later on.  It is difficult to do this successfully – but its often key to the strategy.  At the same time as building the wonder team you might think about dealing with dead wood – pruning or transplanting as appropriate.

4.       Get you data together when you come to market the business, and especially when you get to the end of the process you need control of the data.  It’s a common failing to spend too little on the finance function so that it becomes a hard job of recreating data to tell the story of the business, and to provide legal disclosures prior to sale.

5.       Document stuff many businesses keep much of their knowhow stored in a dynamic organic data store – I.e. inside the heads of the assets that go home every night.  Get your key knowledge systematised and documented.  A buyer is much more likely to value it if it believes it can really see and maintain the asset it has acquired.

6.       Establish a track record of forecasting when you come to put together the sales package - and more importantly to persuade someone to pay for potential and not just last years numbers - you need to show that your forecasts are worth the paper they’re printed on.  Buyer due diligence will often include a review to see how good you were in the past at forecasting the businesses performance.  If your not very good at this be self critical, and if your budgeting processes are not working consider a full review. 

7.       Management Bandwidth when you come to doing a deal management time and patience will be at a premium.  Selling a business can be a full time job, but then so is running a businesses and you don’t want either to suffer.  Plan, put teams in place, and don’t leave yourself so plumbed in to the business that you cannot spare time without damaging it.  That’ll also make it easier for you as owner to leave upon sale if that’s what you want to achieve.

8.       Plan for after the deal You will need a 100 day plan to help the acquirer to integrate, especially to keep people happy.  Also if you are going to realise your asset and get lots of cash you need to do some wealth management planning in advance of the deal.

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