The decision to sell your business or buy an existing one is rarely, if ever, simple. Business owners choose to make the decision based on any number of reasons, the most common of which include branching out and pursuing other business ventures, profiting financially, or eyeing more substantial retirement savings. The first rule of mergers and acquisitions, however, is that unless the circumstances are dire, the decision to buy or sell a business should never be made hastily. Multiple factors contribute to a successful M&A transaction, and you’d do well to consider them carefully before making up your mind.
What are You Selling/Buying?
Whether you’re selling or buying a business, it’s important to ask yourself a few critical questions.
- What is for sale?
- What is and what isn’t included with the buyer’s investment?
- Is real estate accounted for in the sale price?
- Does the sale price include essential assets, such as machinery?
What Does the Range of Assets Include?
Before settling on acquiring any particular business, it’s essential to understand a business’s range of assets because they form the core of the business and will be critical for long-term success.
- What all is proprietary?
- Are software, patents, and formulations involved in the transaction?
Evaluate Assets for Profitability
If you’re a seasoned business owner, you’ll know that not all assets contribute to profitability. This is why it’s essential to determine the assets that hurt the business’s bottom line instead of boosting it. These will typically include assets that are far too expensive to maintain and those that simply aren’t earning money. This will take a bit of focus and due diligence, and it helps to have a seasoned M&A business advisor guide you through the process.
Determine Competitive Advantages
If you’re selling a business, you’d do well to be upfront with buyers about the competitive advantages your company will provide them with. You should make it a point to include it in your offering/selling memorandum’s executive summary. Prospective buyers will want to be clued in on why buying your company is the business-savvy decision to make. You need to provide as precise an answer as possible.
A business that can’t be grown doesn’t provide much use for a potential buyer. While you don’t need to have effectively implemented business growth strategies if you’re selling your business, you must be prepared to offer buyers potential strategies and ideas for growth.
When buying, make sure to find out how much working capital will be required to run the business. Some businesses tend to be more capital intensive than others.
Depth of Management
A business is only as good as the people behind it. With that in mind, ask yourself what the management team will look like and what its level of experience is. What can you expect from your team members? Does the business you’re acquiring rely heavily on the owner? The manager? Is the business going to be in disarray if the owner or the manager leaves?
If you’ve chosen to sell your business or are looking to acquire one in Ohio, South Carolina, New Jersey, Pennsylvania, Massachusetts, Florida, Georgia, or elsewhere in the US, consider partnering with us at Gulfstream Mergers & Acquisitions.
We are a reputable M&A advisory firm with decades of experience in the business of successfully helping clients settle mergers and acquisitions. Whether clients are looking to sell their businesses or are looking to buy a business for sale, we ensure we maximize deal value and create lasting and positive relationships.
Contact Gulfstream Mergers & Acquisitions for more information or call at 1-704-892-5151.