18/11/2021

18/11/2021

The Art of Selling or Buying A Business – A Pragmatic Approach To Getting The Most Value You Can

Selling a business is challenging in any environment but that shouldn’t lead us to putting a deal on hold. One can still achieve the best value (from a sell-side perspective) by ensuring effective implementation of the following stages:
  • Understand what it is you are selling

Focus should be placed on understanding where investment would facilitate highest growth and value. Analyse what the business has achieved to date, its current conditions and project trends accordingly. This will help in knowing the value your business will create for the potential buyer.  
  • Create a powerful value story and assess your strategic exit options

The next step is to create a powerful story for the potential buyer based on the qualitative and quantitative assessment of the business. During this stage, it is also advisable to carry out an assessment of the potential financial, tax and operational costs of exiting a business.

  • Prepare your business for exit

At this stage the seller should focus on preparing a comprehensive information package. This needs to be supported by a strong financial model, accurate data and projections of the trading potential of the business under consideration. It might be worthwhile for the seller to have clarity on the needs of the potential buyers. This will also help eliminate a few buyers early in the process and narrow down the pool of potential buyers to entities that have greater synergies.  
  • Manage the deal strategically and effectively

It is important to manage the sales process in line with one’s specific business strategy. Mapping out the sale process and preparing the communication plan early in the process will help drive the transaction in an effective manner and also help enhance the deal value. This will further help manage the multiple stakeholders i.e., M&A advisors, internal transactional team, 3rd party consultants, etc, effectively. It is advisable for the seller and potential buyer to agree to rules of engagement to define how they would interact and what information would be made available during each stage of such engagement.  
  • Have control over the pre-close process

During pre-close process (from sell-side perspective), the seller should carefully consider his/her separation plan, and further ensure that the buyer has all the requisite support to exit from the transition service agreement (TSA). Here separation plan includes identifying and evaluating the legal and tax requirements incidental to the transaction and seeking appropriate regulatory pre-clearances. To conclude, securing the best value in any deal is a complex process which involves gathering a nuanced view of your business and understanding the expectations of any potential buyer. We, at Cooney Carey, have a dedicated team of experts to help you manage the above advised stages seamlessly and secure the best value from the transaction.

Buying A Business?

The path to acquiring any business has many paths. From identification of the right target to integration of the business bought, it is essential to have a plan for all the stages involved. We believe that from a buy-side perspective, for a successful acquisition the following must be considered:  
  • Development of the right acquisition strategy

To maximise shareholders value and returns, it is important to evaluate how an acquisition will fit in with your organisation’s strategy. This can be achieved by performing an assessment of your risk appetite. Identify the potential areas of investment and determine if you are prepared to do a deal.  
  • Identifying the right business within the target market

Based on your above acquisition strategy, list out the suitable potential target companies in terms of markets, products, and geography. The list of identified companies should then be narrowed down to pinpoint the priority targets that are to be approached by assessing the strategic fit and feasibility of the deal. It would help to understand the motivation of the potential seller and their goals/rationales to arrive at more accurate evaluation of the targets.  
  • Knowing the worth of the asset and getting the deal done at the right price

To evaluate the potential value and long-term suitability of the acquisition it is essential that a rigorous due diligence is performed on the target company. This should primarily include assessing the earning sustainability, relevant benchmarking, cost structures and other hard metrics.  Performing a scenario analysis based on opportunities and risk factors, will further help validate the value of the target.  
  • Taking control of the business from Day One

During the transitioning process, it is essential for any buyer to maintain a firm control over the business being acquired. To facilitate this, the buyer must maintain effective communication with all relevant stakeholders. Identify the key transition service agreement (TSA) processes, responsibilities, and timetables.  
  • Have a plan for delivering the value and monitor the operation

As the buyer moves from the integration process to a single organisation, it is advisable to have a 2-3 year operating model for the overall business. This will help support integration targets and monitor benefits according to the plans. To further support the value of the acquired business, the buyer must have clarity over the level of integration desired, have a governance structure in place and design and implement KPIs or performance metrics. The buyer should frequently monitor the operation to ensure there is enough room for flexibility if any adjustments are required as the integration process nears to an end.  

Plan Ahead

Finally, the key to any successful deal is to implement the lessons learned from it to improve the day-to-day business operation and applying it in the next transaction. After the deal has been completed from all angles, the new business owner should carry out a post-deal integration review. Cooney Carey’s Advisory team take a pragmatic approach in facilitating your growth plans by helping you spot the right opportunity and guide you through the entire buy-side transaction from start to end.