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Raising Capital, venture capital, Venture Debt

How Entrepreneurs and Business Owners Prep for Effective M&A: Tips for Sellers

Today’s guest post is by John Parsons of Tatum. With Tatum’s 6,000 client base spread across the US, he’s got a great vantage point to speak on this topic. As you’ll read, the data on the IPO and M&A markets are very positive so if you’re not having fun now, I’d suggest you start real soon.

John: The resurgence in the M&A market thus far in 2011 has been dramatic, with a 93% year-over-year increase in transactions in March, according to a report from Robert W. Baird. The growth plans of many companies include acquisitions, providing an immediate opportunity for well-prepared entrepreneurs and business owners. Successful transactions require careful preparation and due diligence on both sides of the transaction, not only in preparing your company for sale but also in driving the integration process. With activity on the rise Tatum’s Mergers and Acquisitions practice compiled observations culled from helping companies complete thousands of successful transactions.

4 Tips in preparing your company for sale: 1. Get your House in Order by looking at your business the way potential buyers will.  After thorough assessment, launch efficiency improvements, clean up financial statements and capital structure, build the cross-functional information often with a virtual data room to pave the way for the tough questions and due diligence to come.  2.  Retain the right advisors.  This may be the most important event in the life of your company, so the right M&A advisors can lead you through each step, including determining the true value of your business and operational opportunities to increase that value.  3.  Determine the right type of buyers and the different views of strategic buyers such as corporations seeking to achieve growth and expansion goals which may be willing to pay more, and financial buyers such as private equity groups that may move faster. Which alternatives are right for your situation?   4.  Demonstrating your value.  By not only understanding the key business metrics that drive valuation but also appreciating what buyers value most about your business, whether it’s new product or service, geographic expansion, human capital, fit with complementary businesses, or other areas, you may prepare compelling analysis and documentation of your earning potential, as well as identify opportunities to increase your value.

2 Tips in driving the integration process:  1. Get a seat at the table now.  Integration is the key to success or failure of any acquisition.  As the seller, be involved from day one helping to construct the integration team, particularly essential as you may have agreed to an earn-out or other ongoing compensation.   2.  Look out for your other Stakeholders.  Others with a stake in your transaction include your employees, your customers, your suppliers and shareholders.  Effective communication with these stakeholders is critical to successful integration.

Get the right advice, beginning early in the process and carrying on throughout.  Remain in control of the process and be ready to take action when the time is right.  With an intelligent, yet measured approach to selling, you can ensure a smooth transaction and come out on top in a volatile buyer’s market.

John Parsons

phone  603.689.4990


About venturedebt

venture debt firm providing growth capital for emerging growth companies


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