One of the biggest challenges facing entrepreneurs is the ability to grow and sell their companies on their terms.
Traction Advising, an M&A advisor for small to middle market technology clients globally, has identified key strategies for a successful sale. “It is a lot of work to sell your company and more stressful than most CEO’s anticipate. To get the most for what you have built it is important to take the right steps early in the process,” said Lowell Rickfels, founder and managing partner of Traction Advising.
There are six key steps when it comes to the planning aspects of a company sale to put in place to maximize the potential of a business sale:
1. Do business with potential buyers.
2. Reach out to potential buyer decision makers (CEO’s).
3. Create a data room structure for key documents and feed it.
4. Messaging – what do you have that they care about – articulate this.
5. Be vigilant about non-competes, IP assignment etc.
6. Clean-up & document- client (signed contracts), founder, and employee issues.
Start early and find a good M&A partner- it’s a longer and more complicated process than most entrepreneurs may think.
1. The list
Create an exhaustive list of potential buyers. Start with existing partners and customers but remember that this is just the beginning. Take a 10,000-foot view of the core value your technology provides. Scan the globe for companies that could benefit from the team/talent/skills and the product functionality/IP/technology that you have to offer. Research potential companies by reading through annual reports, websites, news releases and blogs to find holes in their current offering that you can fill. Find companies with a strategy that includes offering what you already do today.
2. Find the right buyers
Look within the company to find the right people to speak with and their contact information. Would you consider offshore buyers? There are thousands of successful and wealthy companies and individuals in other countries who are interested in buying US technology companies.
3. Data Room
Start to assemble a data room with all of the documents that a potential buyer will need to see – this includes Contracts, Corporate records, Employee agreements (employment, IP assignment, non-competes), Financials, Insurance, Market information, Product information, Leases and Taxes. Initially the goal is to organize the information into electronic files and identify any missing gaps.
Create a pitch deck that clearly articulates a story that resonates with the intended audience. Paint a picture of what a better world would look like for them with what you have. Address needs on their part first and then walk them through what you do and who you are. Create a messaging matrix – these messages need to be crisp, concise and relevant to your potential buyers (CEO, CFO, CMO, VP Engineering, Corp Dev.). The first step is to create interest on their part so that they will engage in a deeper dialogue. This is critical.
Make certain you have in place non-competes, IP assignments, yes be vigilant when it comes to this. Create a suitable NDA for use with interested parties and be sure to have a good attorney ready before you begin – this is a critical role. They will be the primary interface with the acquirer’s attorneys and this can make or break a deal.
6. Clean-up all your issues
Client, founder, and employee to start with, every company has them, address and fix issues now in the planning process.
Selling a company takes time and expertise. Find a good M&A advisor, someone you can trust and has the credibility to help you get the right deal and to get it done.
Seattle based Traction Advising specializes in helping entrepreneurs grow and sell their companies. It specializes in strategy, process and M&A for growth stage companies, driving scale and maximizing exits. The company is led by Lowell Rickfels, a seasoned M&A expert who knows both sides of the process and helps get maximum value for companies by finding the right buyers.