4 Things You Need to Know About Mergers, Acquisitions, and Sales
Mergers and acquisitions cannot be rushed.
If you’ve been thinking about selling your company, chances are, you don’t know where to begin. After all, mergers and acquisitions take time, resources and knowledge.
Prior to selling, everything from finances to human resources, legal documentation, business planning, and more needs to be covered.
To simplify this process, we’ve outlined the top 4 things you should know about mergers and acquisitions.
Valuations are Negotiable
The valuation of your company is critical. After all, it’s what determines the selling price. Without this information, you could be selling for less (or more) than your business is actually worth. And, once the papers are signed, there is no turning back.
To ensure that a bid is accurate you should do some first-hand research. The most important research will be to review any market comparables.
While reviewing, be sure to ask yourself questions. Things such as: Is your business growing fast or slow in comparison? And, what have other direct competitors been selling for?
You’ll also want to review any other details that can impact the selling price. Such things as the company’s projections, sales, prospective opportunities, and any potential legal risks the company can face. All these factors can impact the price. Plus, it’s what makes negotiating an offer possible.
Based on this information, you can then gauge what an appropriate price would be. All while having the proof to back it up.
They Take Time
Be prepared for a merger or acquisition to take some time. On average, most sales can take anywhere from 4 to 6 months to complete. So, be sure to prepare well in advance.
The reason for the delay is that buyers tend to take their time researching into the sale. Therefore, depending on how urgently they want the acquisition to go through, you may be stuck waiting months.
To speed up this process, there are some things you can do. Start by preparing all necessary documents (such as contracts, statements, and patents) for the buyer to review. Review all of your financial records, projections, and sales. Memorizing this information can help you fast-track the answer to tough questions asked by a potential buyer.
You’ll Need a Legal Team
If you don’t already have a merger and acquisition lawyer, you will need to get one immediately. Legal counsel is needed to draft the agreements and work as the key negotiator/advisor of bids. Without a specialized team of counsel, you likely won’t have the knowledge or resources readily available to handle this.
Therefore, be sure to carefully screen the legal team you are working with. Not only should the counsel team be experienced with mergers and acquisitions, but they should be specialists within your specific industry. For example, if you are concerned about cybersecurity or data privacy, working closely with someone who has first-hand knowledge is beneficial.
The Agreement is Critical
As a seller, the drafted agreement is absolutely critical. After all, it’s the best way to protect yourself during the sale.
Things such as the purchase price, transaction schedule, conditions of closing, intellectual property, liability representation, exclusions, and more will all need to be clearly written in.
As such, you should turn to the help of your attorney to prepare the agreement. And, it’s best to start working on a draft as soon as possible. These agreements are extensive and tend to undergo numerous edits.
If you take anything away from this article, it’s that mergers, acquisitions, and sales take time. Additionally, it’s a process that needs careful consideration, research and expertise to navigate. If you’re interested in learning more on this topic get in touch with a member of our team who’d be happy to help.
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