Local companies like Brampton’s Shnier-Gesco Limited Partnership and Mississauga’s YM Biosciences Inc. have recently announced big merger and acquisition deals.
YourMississaugaBiz.com recently spoke with PricewaterhouseCoopers partner and M&A specialist Eric Castonguay for some top tips and advice for businesses that are also looking to be acquired or merge with other companies in the future.
1. Have a plan
Castonguay recommended business owners set up a plan and having it in place well before they plan on selling their companies.“That could include a succession plan if it’s an owner-managed business or one for your management team, cross training or systems,” he explained. “This will help a buyer operate a business.”A plan can also help address issues like excessive reliance on an owner for things like relationships with key customers before they become a concern for potential buyers. Steps like tax-planning can also help maximize the cash that a business owner would receive from selling their business.
2. Get an adviser or other expert to help you
Castonguay said a qualified professional can help putting a business in the best possible light, serve as a sale preparation coach for the shareholders and business owners and keep emotions in check during negotiations.“People who build businesses tend to have obvious emotional attachments given the amount of time and effort they put in,” he explained. “Having a third party involved tends to facilitate negotiations.”
3. Don’t underestimate how long the process will take
Selling a business often takes six to eight months and sometimes up to a year, depending on the circumstances. Castonguay said it’s easy to underestimate how much due diligence and time is required with the interested parties or buyer(s).“It’s important they have a good enough understanding of your business that they can bid with confidence, give you their best value and not discount the valuation though uncertainty or a lack of comfort,” he explained. Castonguay said it’s also good for companies to have a few years of audited statements prior to selling your business. “They’re not a necessity, but it’s certainly helpful in giving buyers confidence in your financial results,” he said.
4. Being clear about objectives will help determine the type of buyer
If a company is looking to sell a business in its entirety, a strategic buyer would be a better fit because they have a management team in place. A private equity buyer would be appropriate for business owners who are concerned about competition, looking for growth and would still like retain a partial stake.
5. Don’t leave the tank on empty when you sell
Castonguay said business owners need to continue to invest in the business and operate it with a long-term perspective towards its future even while considering a sale. “While historical results and profitability do play a part in valuation,” he said, “It’s really the future potential of the business the buyer is acquiring.”
Karen K. Ho 