The M&A market is much better than it was.  Companies are selling.  But the recovery is fragile and its important to prepare well in order to maximise the value on sale of a company.

Three key things to do are put your house in order, accept "funny money"  and sell the growth plan.

Housekeeping

This is always important - but especially so now.   Get your accounts squeaky clean.  And your balance sheet in order - i.e. not stressed.     Think about the impact of any investments on the level or surplus cash on sale - will you get better value by deferring them or funding them differently.    Also have a good clean track record, and if there are any ups and downs have them cleanly recorded so the buyer can easily understand what's gone on.

Funny Money

By this I simply mean that to get the best price you may have to accept defered consideration, earn out deals, or paper.   There's less liquidity about, and buyers with cash tend to want to hang on to as much of it as possible.  Deals are often done with between 33% and 50% seller financing.     This is not neccesarily a bad thing.  It depends how its structured.  And don't assume that earn outs are a bad thing - not everyone makes money from them, but I have advised on a number of company sales where the team have made most if not all of their earnout.

Growth Plan

In an uncertain environment you need to make the case why your company will prosper and even grow once it has changed hands.  You don't have to have implemented your plans - but it would be good to illustrate that you have tangible plans to increase profits.  For example if you plan to enter a new market, it would be good to have taken the first steps - you don't need to have set the world alight - but a buyer will rate you higher is you have proven your new idea has potential.

Buyouts are usually discussed as being distinct from M&A - more usually thought to be corporate merger and acquisitions - although of course they're just another flavour of acquisition transaction.     Barclays Private Equity and the Centre for Management Buyout Research have recently published their review of activity in Q1 of 2011.   Lots of stats but interestingly on the one had management buy-out volumes are at historic lows and at the same time MBOs rose to account for a greater proportion of M&A activity in a flat market. 

Within the MBO market the smaller deals - which they classify as below £10M have suffered the biggest downturn with just 269 deals at a value of £508M completed in 2010 compared to only 75 deal;s at a value of £137M in the first quarter of this year.  Not surprising given that the lack of bank liquidity for deals is most pronounced at that end of the market. 

Despite that the overall prognosis is marginally positive - some signs of recovery in volumes and just as importantly in the UK exit market.     Given the recent Eurozone problems, and that of the US economy I can imagine that the Q2 report when published will be even less bullish (if possible).

Here's 7  exit planning mistakes to avoid.

1. Don't be reactive

A great strategic buyer might just beat a path to your door.  But its unlikely.  Even less likely is the thought of two or more buyers chasing after at the same time.  

So be proactive - if you want to sell your company you can get real competition amongst buyers - but only if you have an auction process to drive them towards you in the first place.

2. Avoid loss of focus

Its very easy to become consumed with the sale process - and this is usually rapidly and significantly to the detriment of the business.   Hire some professionals to market your businses and to manage the sale process - leaving you to make the single largest contribution to the process that of continuing to trade profitably and develope the company.

3. Bad timing

Judging the best time to marketint the comapny in order to maximise the sale value is critical.  Think carefully about how the company is performing, and what's happening in the market place - for example is there consolidation currently happening in your sector?

4. Not having a realistic idea of what your business is worth

Do you have a good idea what its worth today?  You need to form realistic expectations before going into a sale process to ensure that the outcome will meet your needs in retirement, or as capital for your next project.

5. DIY

This is not a DIY project, to get the best outcome and to maximise the value from a sale of your business you need to work with an experienced team with the insight, resources and marketing skills to get your company in front of the right buyers, and to engineer real competition.

6. Leave time for the process

Selling a buiness is complex, and to get best price can take 3, 6, 9, or even 12 months.  Prepare early, get your house in order, and approach the sale in a controlled and planned fashion for best results.

7. Consider alternative strategies

Selling now to a trade buyer may not be the best answer.  Have you considered a management buyout as a means to acheiving succession?  This might allow you to sell in part and ease out gently whilst relesaing capitla tax effectively.