Planning Ahead

I recently met with a local investment advisor, and we discussed a few of our clients:  how they grew their businesses, what their plans for an ultimate transition were, and whether their transactions were as successful as they’d hoped.

The common thread throughout the discussion was that those of our clients that had planned for a liquidation event were much more successful than those that had not.

Transactions are very, very difficult.  There are many factors pulling buyers, sellers, lenders, and other stakeholders in various directions.  As a colleague of mine recently said, “given how difficult transactions are to get completed, I am surprised that any M&A happens at all.”

Planning Ahead

Planning Ahead

For this reason, planning for an eventual transaction is crucial.  The best alternative is to develop a relationship with a competent M&A advisor years in advance of a potential transaction.  Start working very early making sure that your company is appropriately positioned for a transaction from the outset; when it is relatively easy for you to make changes.  For example, getting financial data in good shape, having the right corporate structure, and making sure the management team is organized effectively is not too daunting a task years before a sale.  But, trying to clean up a company a few months ahead of a potential transaction is virtually impossible.  The difference between a company that has planned or not could be millions of dollars or even whether a deal is able to be completed at all.

Similarly, on the personal side, making appropriate estate planning decisions or taking legal precautions are simple in advance, but much, much harder when a transaction is imminent. Taking steps at the right time can ensure that you maximize the value you retain from a sale of your company.

While it is difficult to make the time to sit down with an advisor (or a team of advisors) years before you are planning on a transaction, there is not much that you can do to create more value for yourself, your family, or your company.

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