Whether You’re Acquiring or Exiting, Do Your Diligence
Navigating the sale of your company is difficult whether you’re a startup rookie negotiating your first exit or a wizened executive brokering a massive corporate deal. Teams will inevitably get drawn into the minutiae of due diligence—an issue that gets amplified if there’s no dedicated business development group or if your company doesn’t have experience with mergers and acquisitions.
Most likely, you’ll also have to hire an investment bank to put together a confidential information memorandum (CIM) that’s circulated to prospective buyers and gives them key data, such as tax information, revenue forecasts, vendor relationships, and employee salaries and benefits.
Ultimately, what you need is someone to give your company the equivalent of a physical—and you better be sure it’s healthy.
This is especially true in tech, where meteoric valuations can raise red flags for investors looking to scoop up a valuable business at a fair price. Potential suitors are scrutinizing data more than ever. Enter the sell-side experts at Mazars, the global consulting firm. By knowing what buyers are looking for and by taming the complexity of due diligence, Mazars advisors boost the likelihood of a successful deal.
If you don’t have a dedicated accounting team, it’s likely that your books need a thorough review. What a sell-side expert can do is spot troublesome math ahead of time and give you the ability to provide candid and thoughtful responses to questions from potential buyers.
This kind of information, in turn, can attract more qualified bidders and be invaluable when negotiating a price. It’s a way of giving company owners an extra shot of confidence when they’re sitting across the bargaining table from a group of hungry financiers. (The exercise also focus your energies on any accounting weak points, like that P&L spreadsheet your growth hacker Dylan learned how to put together in his Accounting 102 class.)
Time is Money
Rushing into a deal is never a good idea, but answering questions from potential suitors quickly can be the difference between a smooth exit and a deal that unravels. Sell-side consultants can give your team some breathing room in the middle of negotiations by answering complex questions from buyers in a timely fashion, freeing you to actually run your business.
In such an overheated climate, investors looking for a new acquisition want one thing: confidence. (Okay, confidence and a massive user base and a sound revenue model, but still.) Buzzy phrases like “adjusted operating income” and “non-recurring revenue” might as well have blaring alarms attached to them given how they can discourage potential buyers.
With finances, in particular, external resources can be crucial to ensure a clean exit. Experienced advisors can look at profit projections and income statements and make sure they’ll stand up to scrutiny from the most exacting buyer—a difference that can make or break a potential deal.
This article was paid for and posted by Mazars USA LLP.