Critical M&A Questions All Owners Need to Ask

Part 1: What matters Most to Me?

Selling a business after years or even generations of sweat equity, emotional investment, and time is always a long and complicated process fraught with challenges. No two M&A transactions are ever the same, and unless one has been through it before, there is no way to truly understand the countless steps, pitfalls, and possibilities therein. A successful M&A transaction will almost always require a long period of methodical preparation backed by an experienced team of advisors with a detailed understanding of your exit objectives. One of the most important factors in completing a successful sale of a business is having a clear and considered assessment of what you hope to get out of the transaction. The answers may not be as simple as you think.

It all starts with the first thing every owner should ask themselves: What matters most to me?

The answer that seems obvious to many owners is to get the highest price. But there are also many less obvious priorities that will impact how you should approach your transaction – influencing the advisors you should select, the types of transactions and structures you can consider and the buyers or investors you approach. Even getting the highest price is not as simple as it sounds, as transactions are structured in complicated ways that can have very different results for how much of the perceived purchase price ends up in your pocket, when it will be paid and whether there are post-closing risks to your proceeds. In many cases a lower “price” can result in greater net proceeds if the transaction is structured more favorably and/or you have done efficient pre-planning.

But the sale of a business is never just about the financial goals of an owner. Other elements of a transaction important to you, both quantitative and qualitative in nature, should be considered and generally prioritized if possible. For example, how might a potential deal impact any family members who work at the company (vs. those who don’t)? Your employees? The management team? Customers, suppliers, the company’s brand and legacy, etc.? Understanding the trade-offs associated with various approaches to a transaction and how best to balance your objectives can be very tricky, and some of your desired outcomes may well be at odds with one another. So you need to think through these things carefully to be able to articulate your desires, questions and concerns to all your advisors when you interview them.

Rest assured – every single concern you have is shared with other owners who have sold their business. It is a long, stressful, emotional process for everyone who goes through it. The most useful and practical advice we can offer is to list and prioritize any concern that comes to mind – both small and large, then ask your advisors their advice on how they have seen other owners deal with each one. It is important to remember that you are always in control of how you want to proceed – the ultimate decisions are always up to you. But take advantage of the knowledge, experience and strategies others before you have used to accomplish their optimal combination of objectives.

It is important to note that it shouldn’t cost you anything to get educated about these challenging topics or even lay out a strategy for your M&A transaction. Most prospective advisors should be willing to answer your questions as a way to get to know you, let you get to know them, and begin the valuable trusted relationship necessary to get these types of transactions done the right way. The way that people respond to your questions will help you determine whether they are the right fit to represent you and your company. Reach out with any thoughts or questions you may have and expect answers that leave you feeling more comfortable with the strategy you are developing for your process and prospects.

Once you wrap your head around what matters most to you in a potential deal, you will be ready to address with your advisors some of the common misconceptions that you and many other owners may have about the process.

Be on the lookout for future parts in this series over the coming weeks:

  • Part 2: How to deal with valid concerns and common misconceptions in an M&A transaction
  • Part 3: Questions you should always ask Investment Bankers
  • Part 4: Questions you should always ask Law Firms
  • Part 5: Questions you should always ask CPAs/Accounting Firms
  • Part 6: Questions you should always ask Wealth Advisors

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