Amerimark Capital Corporation
Investment Banking—Corporate Finance—Management Transition
10 Key Questions Shareholders Should Consider
1. Is this a good time to sell?
The market to achieve attractive prices and terms for privately owned companies is excellent. Although we are living in challenging economic times, private equity firms are awash with cash and strategic companies are looking for ways to expand sales and profits.
2. Should I hire a professional firm to value my company and establish an asking price?
The answer is generally no. Valuation service companies focus on developing a single price that is more useful for ESOP valuations and other legal requirements. Most quality investment bankers will provide a pricing range without charge for clients interested in selling.
3. How can I obtain the highest possible price?
Competition among buyers creates the highest price. The key is to generate multiple offers from quality acquirers and discreetly negotiate among them creating a confidential auction process. Skillfully applied, this process motivates buyers to offer higher prices and better terms.
4. Can I expect to receive all cash for the sale of my company?
It is possible to receive 100% of the price in cash; however, most transactions yielding the best price are a combination of cash, notes and non-compete/consulting agreements. Most acquirers must borrow money to complete transactions and bankers generally prefer that selling shareholders maintain a stake in the success of the company for some period after the sale.
5. How long will it take to sell my company?
Most transactions take 6 to 9 months to complete. While it is possible to close a transaction in less time, it is recommended that selling shareholders plan at least a year in advance.
6. Is documentation describing my company important?
The documentation describing your company is critical to the process. Properly prepared documentation answering the 20 to 40 key questions most often asked by busy executives motivates them to travel for the purpose of visiting your company. Poorly prepared documentation leaves a bad impression and often masks the real value of your company.
7. My sales and profits are trending upward. Should I wait until I think my company is at its peak?
Sell when sales and profits are improving. When it becomes obvious to you that your company is near or at its peak, thoughtful acquirers will likely reach the same conclusion and value will sharply decline.
8. Should I sell to my competitors or suppliers?
Every situation is different; however, competitors and suppliers will usually not place a premium value on your company. They usually suffer from the “not invented here” syndrome, plus there are often significant confidentiality issues with these buyers. Buyers who understand your markets but are not direct competitors usually pay more.
9. How can confidentiality be protected?
Confidentiality is always a critical issue. Skilled investment bankers avoid advertisements, brokers and other unsecure means of marketing a company. They obtain confidentiality agreements and deal directly with decision makers, usually CEOs who understand confidentiality.
10. Should I hire a professional to assist me in the sale of my company?
Anyone can sell a company! The question is, will you achieve the best possible price and terms. A professional investment banker has engaged in scores of negotiation and understands who to contact and how to confidentially generate multiple offers. Selling a company is one of the more important decisions business owners make. Mistakes can be measured in millions.