(Photo Courtesy of CrossPointe, Inc.)
Navigating the sale of your business is a lot like running a new stretch of wilderness whitewater. I’ve spent a lot of time on wild and dangerous rivers… and enjoyed a 36-year career helping people navigate complex business sale transactions.
No matter what your level of paddling experience, it makes sense to hire a first-rate river guide. Most tragic accidents on big rivers don’t happen due to lack of boater intelligence or skill. They don’t happen because river runners are innately stupid. They happen because river runners sometimes do stupid things, with devastating consequences. The main causes of whitewater wrecks are arrogance, carelessness, haste, flawed assumptions and ignorance.
Murphy’s Law is often also a contributor: “Whatever can go wrong will go wrong, and usually at the worst possible time.”
The same factors come into play when selling a business. Just like with a wilderness river trip, when selling your business, it makes sense to hire an experienced, capable and highly professional guide. As you evaluate mergers and acquisitions firms to assist you in selling your company, assess their capabilities in the following essential areas:
Educating and Coaching. Buying and selling a middle market company is a complex transaction. Usually, it is not a common occurrence for the shareholders and sometimes sizeable sale transactions may not be all that common for the buyer’s and seller’s current professional advisors. Even owners and professional advisors who are seasoned and experienced (including intermediaries!) are constantly learning new approaches and techniques. Consequently, one of the key functions of an intermediary is to assist the participants with education and coaching based on the experiences gained from being constantly in a variety of deals.
Preparing. Think of the 5 “P’s”: Prior Preparation Prevents Pitiful Performance. A good intermediary provides guidance on important steps to take for sellers going to market.
Finding Hidden Assets. One of the coolest things an experienced river guide does is pull over and take you on side hikes to beautiful places you’d never notice otherwise as you fly down the river. A capable intermediary spots and highlights the invisible assets in your business (often ones you don’t even see yourself) and showcases them to potential buyers who would otherwise miss the hidden value.
Presenting. The importance of a compelling presentation cannot be overstated. Designing an effective and confidential offering is critical. Often company owners will invest more time and money designing the offer for a new product than they will in designing an offer to sell the entire company. Deals are won or lost in the opening moves. Proper presentation matters!
Selecting. One of the most significant and daunting challenges facing a seller is selecting a terrific buyer for the business. Making a great match is an essential job of an intermediary; it’s both an art and a science, requiring patience, diligence, discernment and skill.
Pricing. How much is a company worth? It’s often a tough question. Deal structure is often as important as price. Working with reasonable, empathetic and fair-minded principals, good intermediaries design transactions valued and structured in ways that can work for both parties.
Negotiating. At CrossPointe, we think of negotiating deals like navigating a whitewater rapid. There are waves, rocks, trees, and a lot of pressure and stress that can flip your boat and keep you from safely passing through the rapid successfully. But you don’t “beat” the river, you don’t beat big rocks, and you don’t “beat” deals. You “negotiate” them. An excellent intermediary is like an experienced river guide…and having a good guide can make all the difference in your negotiating results.
Controlling. Deals don’t stand still. They either move forward or die. An intermediary’s job is to keep your deal from getting stuck in a back eddy and to move it forward to a successful conclusion.
Everyone starts a whitewater trip anticipating a fun and successful journey. Everyone launches a business sale anticipating a smooth, successful and profitable outcome. A good guide can help with both.
For “street-smart” insights into selling your business, pick up my best-selling book on Amazon: Finish Strong – Exit Well: How to Prepare, Position and Sell Your Business for Top Dollar.
Michael Sipe is a local mergers and acquisitions advisor and executive coach to top CEOs.
