Back to Blog

7 M&A Seller Mistakes & How to Avoid Them

    

Plenty of companies embark on the creation and development of a business with the hopes of selling it for a handsome sum down the line. But, the number of those who have aspired to make this dream a reality and those who have actually managed to achieve it diverge drastically. After all, selling a business is not an easy task, and it can take months to years before it actually comes to fruition. Even companies that find an interested buyer and begin to go through the acquisition process often make costly mistakes that affect the terms of the deal or end up killing it completely. Here are seven common mistakes sellers make and how to avoid them:


1. Lack of Preparation

There is perhaps nothing that can kill a deal faster than disorganization and lack of preparation. Far too often, company leaders get way ahead of themselves in an effort to seal the deal when they just were not ready to take that leap. A great deal of consideration and planning must take place prior to entering into the negotiation of deal terms. The leaders have to take a critical look at the business’s activities, finances, and projections if they want to speak with buyers intelligently and from a position of power.


2. Jumping at the First Opportunity

To be happy with the outcome of a sale and increase the chances of it succeeding, it is important to pursue the right opportunity and not just the first one that happens to present itself. A successful deal will occur if the company that is up for sale has made itself highly desirable. This means that operations, finances, and growth potential must be on point in every way possible, as this will lure buyers and foster healthy competition, driving up the price and improving the prospective terms. Diligence and patience will go a long way in helping to secure the right sales terms and conditions.


3. Not Hiring the Right Experts

As preparations commence in anticipation of a sale, it is critical to bring on the right professionals to help facilitate the deal. In general, this team of experts must include appropriate legal counsel, investment bankers, negotiators, analysts, and accountants, among other professionals familiar with the complexity of the acquisition process. Hiring these folks will inevitably cost a bit of money. However, trying to navigate the intricacies of this kind of sale without the requisite skills, knowledge, and expertise on board likely won’t result in a successful sale anyway, so it is vital to hire guidance wisely.


4. Failing to Understand the Market

A huge part of the preparation process must entail conducting research, making calculations, evaluating available data, and integrating these analyses to create a larger picture of what is at stake. Of course, this research and analysis will have to incorporate a thorough review of the existing market, including an examination of competitors, the company’s standing within the industry, customer demands and preferences, and other bits of information that will guide the future of the company. Companies may try to wing their way through this part, but this will only demonstrate to prospective buyers that the company is not well poised to make it to the closing table.


5. Inadequately Organized Data

Organization clearly coincides with preparation, but putting together data in an organized fashion will become increasingly important as the due diligence phase of a sale draws closer. In general, M&A transactions necessitate the use of a virtual data room, as this will serve as the centralized and secure database for all pertinent paperwork. Establishing a deal room may not be an outright requirement, but it will absolutely facilitate the exchange of information when the time comes.


6. Neglecting Timelines

Time is often the slow, silent but inevitable dealkiller. Deadlines that are overlooked or timeframes that require constant adjustments and delays can easily dissuade a buyer from continuing to move forward. Time is of the essence in virtually every transaction, and with an acquisition, wasted time usually means wasted money. This is once again where planning, preparation, and organization will prove critical to keeping things moving along.


7. Losing Sight of Business Operations

Sometimes company leaders get so bogged down in the sales process that they forget to run the business that they are seeking to sell. This may result in production disruptions, lost customers, and declines in revenue. Any of these changes will impact the value of the company and thus could end up influencing the final numbers. Someone on the team has to keep a strong hold on the reins to avoid ruining the deal altogether.

Securedocs-due-diligence-checklist