Sale Prep Tips
Merrimack Group provides tips for business owners planning a sale to ensure a smoother process, more offers, and ultimately a higher valuation.
Tip 1
Invest in audited financial statements
The cost of audited financial statements is typically minuscule relative to the value of a marketable company...
Tip 2
Clear up any legal issues
It is not unusual for large companies to have at least one active or threatened legal dispute at any given time, so it is generally not feasible...
Tip 3
Strengthen your point of differentiation
Buyers generally prefer companies with a well-defined point of differentiation. It could be superior products, faster lead times, outstanding support...
Tip 4
Clean up your contracts
We find that many clients need to scramble to chase down contracts when it is time to set up a data room, which can obviously delay the...
Tip 5
Develop a succession plan
Private equity buyers are increasingly active in the M&A market, and they typically prefer to invest in companies where the owner is several years away...
Tip 6
Keep track of EBITDA adjustments
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the most widely-used measure of profitability in North America. The rationale is...
Tip 7
Shed unprofitable business lines
A year or so before launching a sale process, we recommend identifying unprofitable lines of businesses with a view to discontinuing them...
Tip 8
Manage expenses
While it is important to be able to articulate a growth strategy to potential buyers, we do not recommend heavy investments in R&D projects...
Tip 9
Update your website
Buyers invariably look at the client’s website to get a feel for the professionalism of the business...
Tip 10
Define your inner circle
Most buyers understand the importance of a committed and capable management team. Especially in situations where the owner plans to retire...
Tip 11
Spin out real estate
Most CPAs wisely recommend that business owners hold any real estate in a separate legal entity. The reason is simple...
Tip 12
Manage your working capital
Most M&A transactions have a purchase price mechanism based on the company’s net working capital (NWC) at closing...
Tip 13
Plan to minimize taxes
Many sellers are unaware of the significant tax implications of the M&A deal structure. In the US, buyers generally prefer..
Tip 14
Build an acquisition pipeline
Most private equity firms are interested in inorganic ways to grow the business. Strategic acquisitions often bump a company up into...
Tip 15
Stop discounting
We recognize that pricing is generally more of an art than a science, and every sales opportunity should be considered on a case-by-case basis...
Tip 16
Sell on an upswing
It typically takes six months to sell a business in a competitive process, so sellers need to hope that...
Tip 17
Build an intellectual property portfolio
We recognize that patents are expensive, time-consuming, and often tough to enforce, but we encourage...
Tip 18
Clean up your facility
Buyers never buy a manufacturing business without inspecting the facilities. They don’t expect perfection...
Tip 19
Negotiate lease renewal options
Buyers always prefer businesses operating in real estate owned by a related party (typically a sister company), so it is feasible to renegotiate the lease as part of...
Tip 20
Consider an environmental survey
Merrimack recommends that sellers consider a Phase I environmental survey of the real estate even if it is leased if...