The buyers in this market are trending to be very careful and diligent in their approach because the tell-tale signs of an economic slowdown are on the horizon. I have seen much more scrutiny from banks and lenders in their underwriting and the process for financing a deal is becoming more demanding in mitigating any risk. As a result, the buyers are looking for acquisitions of premium quality.
To the owners who want to sell their companies, it is strongly recommended to have a solid management team, other than the owner, that will stay on after the sale and is prevented from competing with the company, if they terminate their employment. Secondly, stability and predictability of revenue and cash flow, with low customer concentration. Also, it’s important to have state of the art operating systems.
It has been my experience that most companies are not camera ready for the market place because it takes time, planning and commitment to prepare a business for sale. Before a company goes to market owners and their advisory teams must have plans to enhance all aspects of the company to maximize value. It is also strongly recommended that the owners do not negotiate with potential buyers without the aid of a seasoned business broker and M&A attorney. These buyers are typically much more experienced, sophisticated and knowledgeable about the sale process and implement highly experienced M&A attorneys and investment bankers of their own. So, it’s critical that these owners level the playing field by being prepared with their own team of highly skilled professionals.