How to Avoid Seller’s Remorse in an M&A Deal
Many sellers enter the process of selling their private company with value expectations well above market as well as not being properly prepared. Then they wonder why they regret the results of the sale. You can avoid seller’s remorse by doing the following things:
1) Hire a Good Investment Banker
Shop around and interview different investment bankers to find one you trust and that has a good track record. Ask for references from other CEOs who have sold their companies using that banker and firm. A good banker will help you prepare, help set realistic expectations, manage the process, and get the best possible price and terms for your company. Simply, deals with I-Bankers involved get higher prices than other sale methods (IM me for copy of study).
2) Get Your House in Order Before You Sell
Make sure your financials are in order and that you have up-to-date records. If you do not have audited financial statements, now is the time to get them or, perhaps more appropriately, a sell-side Quality of earnings report. Your banker can advise which will be more important to your deal. Buyers will want to see three to five years of financial statements, and they will want to know that your accounting is accurate. This is also a good time to renegotiate any contracts that are not favorable to you so that they will not be a deterrent to buyers.
3) Get Educated on Value and Manage Your Expectations
It is important to have realistic expectations about the sales process and the final sale price of your company. If you set your sights too high, you will likely be disappointed with the outcome. Work with your investment banker to develop a range of possible sale prices based on recent comparable sales in your industry. This will help you meet your expectations and be more satisfied with the final results.
4) Stay Involved in the Process
Once you have hired an investment banker and signed an engagement letter, it is important to stay involved in the process. You should receive regular updates from your banker on progress being made and should actively participate in marketing your company to potential buyers. There is no such thing as a hands-off approach when selling your company—you need to be involved every step of the way.
5) Be discerning and find the right buyer
There are many types of buyers, and each has its own motivations. Some buyers seek synergies, while others want to enter new markets. Some are looking for strategic value while others prioritize financial returns, and others prize rapid growth. You must understand which type of buyer is most likely to value your business and its assets and ensure you know what you are signing up for, especially if you are staying around for another bite of the apple.
By following these tips, you can avoid seller’s remorse and ensure that you are happy with the outcome of the sale of your company. Remember to hire a good investment banker, get your house in order before you sell, manage expectations, and stay involved in the process. By taking these steps, you can maximize your company’s value and avoid any regretful decisions.
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CDI Global is a leading international middle-market advisory firm, specializing in strategic cross-border transactions.
Whether you are interested in mergers and acquisitions, divestitures, capital raising, or joint ventures, CDI Global is committed to delivering our services with excellence and integrity. Rather than a primary focus on financial transactions, this firm was founded on providing strategic advice to industrial and commercial companies to help effectively grow their businesses through acquisitions and other forms of business combinations. We continue to take this client-focused approach, cultivating long-term relationships so we can help meet our clients’ strategic goals with lasting success. Our teams provide project management throughout our engagement so our clients can continue to focus on running their business.
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By Craig Dickens, CDI Global Partner