If you are a fan of college basketball, March is the wildest month of the year as hundreds of teams from across the NCAA battle it out to get into the Sweet Sixteen, Elite Eight, Final Four and ultimately the NCAA Championship game. It's all about competing and winning.
There are several March Madness strategies that savvy middle market business owners put to work when selling their company. When you are ready to sell you want to find the right buyer, who will pay the most, offer the best terms and be the right fit for your future.
Here are 7 winning strategies for M&A March Madness:
- Prepare in advance--NCAA teams do not get into the playoffs without preparation. They know what they have to do. They eliminate errors, practice thousands of hours and maintain a laser-focus on what they want to accomplish. As a business owner you must prepare for a successful exit. Ensure financial records are complete and up to date. Resolve outstanding legal issues. Review your entire operation and address any area that is under performing.
- Market your business--Partner with an investment bank that has the proven ability to effectively market your business domestically and globally to a broad base of qualified, interested buyers.
- Identify the best buyers--A robust marketing campaign should yield a large number of interested buyers. Think of this as the qualifying round for the Sweet Sixteen. From this pool of buyers you and your banker can select the ones that have the greatest potential to meet your personal and financial goals. Remember that it's not the best companies that command premium prices but those that are marketed best.
- Let the playoffs begin--The ideal way to secure the best price and terms for your company is to identify the buyers who are most interested and willing to make the best offers. This competition begins in the "Indication of Interest" (IOI) stage, where you will narrow the list of potential buyers to the best in the pack. During this stage you will also meet with potential buyers to determine how well their strategy fits your goals and objectives.
- The Final Four--You and your banker have now narrowed the field of buyers even further. Now the competition heats up as a silent auction is conducted between the best potential buyers. The value of a company is routinely based upon financial performance. However, in an auction, the fear of losing the deal can boost the price and enhance deal terms. In other words--the real value of your company is truly what a potential buyer is willing to pay--not just what the numbers predict.
- The Championship Game--You have selected the best buyer and negotiated the best price and terms. The buyer has signed a "Letter of Intent" (LOI) that includes their offer and terms. They will now conduct their due diligence. This is where you have to shine! This is what you have prepared for since you first thought about selling. With the assistance of your banker, you can maintain necessary focus on your game, which is running your company, while balancing the required commitment to the due diligence process.
- You are the Champion!--As the deal closes, the final buzzer goes off and you are the champion! You have monetized years of hard work, and hopefully achieved the financial and personal goals you identified in the preparation phase.
Every industry has "seasons" when it can be the ideal or worst time to sell a company. The March Madness season for a specific industry can come and go quickly, based upon the economy, consumer trends or other factors you do not control. You want to enter your March Madness when your industry is at its peak season. Your company will attract more buyers, command a higher price and sell quicker when it is growing and expanding than when trending downward.
Even when the stars are aligned it is not unusual for the process to take 9 -12 months to market and sell a successful middle-market company. If your industry is in the playoff season now, get in the game--you too can be a winner in M&A March Madness!