Why Is Now the Right Time to Sell?
The Covid-19 pandemic has left many businesses waiting to recover before they consider selling. However, pent-up consumer demand for a variety of products and services means that companies on the whole are seeing their business value return.
As noted in a recent report by PWC, there is also an established pattern of “deals surging after an economic downturn, with companies actively exploring M&A, divestitures and other transactions.” Currently, buyers are sitting on money they need to invest, and this along with lower interest rates, is making selling a viable option.
Keys to Successfully Selling Your Business in 2022
If you do consider selling, keep the following in mind:
- Financial accounting
Make sure your accounts for at least the previous three years are up-to-date, clean, clear, and accurate. This will allow you to determine the net cash flow of your business and help potential new owners see the full value of company ownership. You’ll also want to consult your accountant when a sale is secured. It’s also important to remember that your financial statements will be more useful and credible to the buyer when they have a higher level of financial assurance from your accountant. Audit reports are costly and not always suitable, but Review Engagements are better than Notice to Reader and are often a worthwhile investment when contemplating a future M&A deal.
- Work with an experienced broker to set a realistic asking price
The pandemic has forced a lot of businesses to pivot into new service or product offerings. Before setting your asking price, consider your value over the long-term, not just based on potentially high profits during the pandemic. Consider any areas that need growth, as this can also appeal to a potential buyer.
- Emphasize your resiliency
Having a business that has survived the pandemic, and possibly thrived, shows your depth and durability as a company. Don’t hesitate to broadcast this.
- Don’t get locked into thinking your company can only be sold to one type of buyer
Be prepared for offers to come from different types of buyers, and carefully consider the pros and cons of each. You may see your company continuing a gradual growth trajectory with private investment. Or you may see it merging with a larger organization as a means for your business to diversify. Some buyers might offer a higher price but insist on more long-term involvement from the existing owner, which may conflict with your personal priorities. Some companies may offer a lower price, but the seller is “off the hook” sooner, so to speak.
- Legal considerations
It’s best to use a lawyer that has experience making agreements for M&A transactions. Sometimes your regular lawyer is not the right choice due to different experience and specialties. Your legal counsel has a critical role, particularly in the final stages of a transaction.
- Best transition
You need to anticipate an appropriate transition period to new ownership. Depending on the business and the need for management continuity, this could range from just a few months to a year. Or more. Or less! Many factors between the buyer and seller will influence this.
- A well-prepared team
Prepare your team ahead of time to ensure they’re ready to perform under new ownership. However, you must also carefully handle the confidentiality of the M&A process and your goals. Rumours and gossip about a potential sale can have a negative effect on the business and employee confidence.
Alison Anderson, chief executive officer of Succession Matching, recently told The Globe and Mail that “This is the best time in the last decade to actually sell your business.” If you’re seeking a new opportunity or ready to retire, just get your finances and people in order. There are definitely buyers out there looking for you in 2022.
If you think it might be the right time to Sell Your Business. Contact an expert at Maxima today.