When planning to sell your company, it’s important to consider key factors such as legal requirements, human resources, and finances. You need to consider many things when it comes to mergers and acquisitions involving privately held companies. You also need to research and ensure you have all the documentation required. This article will explore the things you need to consider in mergers and acquisitions involving privately held companies’ sales.
Consider Hiring Mergers and Acquisition Companies
When planning to sell your company, you need to look for a reputable mergers and acquisitions company to help you look for a buyer and other necessary metrics to help you get the best offers. An M&A company will also help you table the documents you need to present to your potential buyers. Finding a buyer for mergers and acquisitions can take a long duration. However, reputable M&A companies have connections with other companies and can help you advertise your business and get a potential buyer. Additionally, they will assist you and your legal counsel in executing and designing an optimal sale process. Also, they will help you prepare an executive summary for a potential buyer. This will save time and ensure you get the deal with the highest price.
The Merger and Acquisitions Valuations Is Negotiable
It’s important to evaluate your company and understand the offer price. The prices are negotiable, just like other M&A deals. However, the valuation of a company’s worth can be difficult because its share is not publicly traded. The negotiations will depend on factors such as if the buyer is a strategic buyer or a financial buyer. Moreso, the valuation done in the last financing round will be a factor to consider during negotiation. Other factors that will affect the result of the negotiation include
- The common trends and technology in the financial performance of your company
- The expertise and experience of your management team
You can consider an earnout when you and the potential buyer fail to agree. This is a structural provision created in the M&A agreement and allows the seller receive more consideration when the business reaches a certain financial metric.
Ensure You Follow the Due Diligence
The seller should remember that the buyer will evaluate the company to ensure it follows the due diligence. Before the buyer buys, they will want to know what they are inheriting to avoid complications later. They will need to know the litigation risk, the contingent liabilities of the selling company, and the problematic contracts that the company is dealing with. The most privately owned company are not scrutinized since they are not listed in the public market. The selling company needs to get prepared to scrutinize all its activities by all potential buyers. As a selling company, you can consider setting up an online data room where they can present important company documents to potential buyers in a controlled way. Some documents in the online data room include employee information, financial statements, intellectual property information, and a capitalization table.
Summary
You should consider the above crucial things when selling your company through mergers and acquisitions. Ensure you have all the documentation needed, as buyers will be waiting to evaluate your business.