In my last
post, I focused on getting your house in order as a first big
step in preparing your business for a possible sale. Here are four
more things you can do to maximize the value of your business.
Understand Your Rights and Obligations
– If you have one, now's the time to dust off your
shareholder agreement. Most shareholder agreements will set out
important rights and obligations that apply during a sale process,
and will be particularly important if some shareholders do not
support the transaction. These agreements can be dense and complex,
so if it doesn't make sense or if it puts you to sleep, then
engage your own lawyer (separate from the company's lawyer) to
review and explain your rights and obligations.
Think Before You Jump – Lots of
sellers are eager to "get on with it", and will appear on
the lawyer's doorstep with the signed letter of intent already
in hand. Resist the temptation to solidify preliminary agreements
with potential buyers – including letters of intent,
confidentiality agreements and non-competes – until
you've consulted with your financial adviser and your M&A
counsel. These documents might sound routine, but they can come
back to bite. Take a look at
Ian Palm's blog post for more detail on this. Similarly,
you should consider various other matters, such as efficient tax
planning, estate considerations and internal restructurings, before
you get too far down the road with would-be suitors. Early, smart
planning can decrease risk and put extra money in your pocket. The
incremental cost of engaging good advisors almost always pays for
itself in more effective negotiations.
Consider Pre-Sale Acquisitions or Divestitures
– Have you ever considered that your business could be
worth more, or could be easier to sell, if it was sold as two (or
more) separate businesses? Similarly, would the acquisition of
another business – such as a competitor or key supplier
– be accretive to the overall value of your business and
increase your sale prospects? Consider these pre-sale transactions
as part of your overall sale strategy.
Keep Quiet – As you tip-toe down the
road to selling your business, it's best to keep your cards
close to your vest. Although you'll want input from your
closest advisors, unwanted leaks, rumors and gossip can hurt your
sale prospects, spook your customers and build anxiety among your
employees. You should control carefully the tone, content and
timing of your messages in the most advantageous manner.
Let me know if you've learned other lessons when buying or
selling a business.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Ontario Securities Commission (OSC) recently released a new edition of the Investment Funds Practitioner, providing an overview of recent issues arising from applications for exemptive relief, prospectuses and continuous disclosure documents filed by investment funds.