In recent years, mergers and acquisitions have increased worldwide. However, factors like high inflation, rising interest rates, and economic slowdown concerns hindered dealmaking during 2022 and early 2023. The number of completed deals last year was lower than the record-breaking 65,000 deals in 2021.
Nonetheless, U.S. M&A activity this year has remained strong historically. While activity dropped in the second quarter, it bounced back in the third quarter. As a result, it’s evident that adept dealmakers continue to discover opportunities amid economic uncertainty. Plus, industry experts expect M&A activity to continue to increase for the foreseeable future.
Buying and selling is one of the most effective methods to improve, transform, and grow a company. However, selling your business is not a decision to rush into. When considering a sale, it’s crucial to understand the challenges and opportunities ahead. While no two sales are alike, business owners can expect to feel a few of the same emotions.
When you decide to part ways with your company, it can be both emotional and stressful. Throughout the process, you will need guidance from people you trust. It’s critical to work with someone who is knowledgeable and can identify your company’s weaknesses, understand its unique value, and help manage the emotional aspects of a sale.
It’s all about preparation
There are some important questions you need to ask yourself before selling your business. You should consider whether or not you are ready to sell. Is your family ready? What about your business? You can find these answers by collaborating with a business adviser, financial adviser, tax accountant, estate planning attorney, and M&A lawyer.
You should have a clear understanding of your company’s overall financial picture, along with the cost of a sale transaction and how it will affect your personal finances. It’s critical to identify the net dollar amount you will need after paying any bonuses, covering transaction costs, cleaning up your balance sheet, and dealing with taxes. All the listed advisers above are capable of providing answers to these questions.
The remaining amount is what you will take away from the sale. You need to consider whether that’s enough for your next phase of life. Are you planning to retire, travel, or start a business? It’s essential to work closely with a financial planner to ensure that the transaction is right for you and your family.
You should also consider hiring a consultant for exit readiness. They’ll review critical components that may affect your business value during a sale. It’s essential to have access to suggestions for improving weaknesses, along with the necessary resources for putting those improvements into action. They can also offer valuable insights into the prospective buyers’ potential purchase price in a sale.
Understanding the whirlwind of emotions
Throughout the sale process, you’ll encounter a rollercoaster of emotions. There may be moments when it seems like the prospective buyer is attempting to take advantage of you. Your trusted adviser can provide clarity, helping you perceive the deal for what it truly is — a mutually beneficial agreement between two parties.
Owners aspire to sell their business at its peak value, while buyers seek to acquire it at an affordable price for long-term growth and enhancement. Throughout the process, you must instill confidence in the buyer by demonstrating your company’s potential for growth and scalability.
While the buyer will probably want to conduct interviews with you and your team, it’s equally important for you to interview the buyer. By doing so, you’ll ascertain whether they are an optimal fit for your company and if their proposed purchase price aligns with your expectations. Additionally, it offers you the opportunity to assess whether you would be inclined to collaborate with them in the short or long term.
Negotiations require a delicate balance between give and take, with timing playing a pivotal role. Prolonging the process excessively could dim the deal’s appeal, potentially leading the buyer to either withdraw or seek renegotiations.
In the final week before the sale is completed, you and your team will likely experience a mix of excitement and anxiety. It’s a pivotal period that demands your unwavering focus. Staying in close contact with your advisory team is essential to maintain a seamless process and prevent any unexpected developments, such as the departure of major clients, key employee turnover, or issues with vendors.
What happens after the deal is done
Once a deal is finalized, entrepreneurs often experience a complex mix of emotions, including both joy and melancholy. While selling your business is undoubtedly a gratifying and exhilarating achievement, it can also be a source of disappointment, as you may not have fully grasped the emotional attachment you had to your business. Having a reliable consultant by your side can be invaluable in preparing you for this moment and providing guidance as you navigate the ensuing realities.
The realization that you are no longer the owner can be a humbling experience. You should consider your next steps carefully and seek advice from those who have been in your shoes. While it’s entirely normal to feel overwhelmed in the aftermath of selling your business, it’s equally essential to acknowledge that your business is now entrusted to capable hands, opening the door to new and promising opportunities.
It is easy to develop bad habits after you sell your business and suddenly change your schedule. No matter your age, it’s crucial to stay physically active, socially engaged, and challenge your mind. By maintaining these three habits, you will be better prepared for the next chapter in your life.
Even so, these habits only take up a small amount of your time. Consider volunteering with charities, serving on board committees, or becoming a consultant in your field. The right advice and support can help you find the best path.
The sale of your business will undoubtedly bring challenges and changes, but you do not have to face them alone. A team of advisers can provide insight into the emotional and real-life aspects that affect you and your family at every step. They can guide you through the process and help you achieve a successful sale with their expertise and support.
Joe Raymond is the Managing Partner of RVR Consulting Group.