- January 22, 2013, Gary Hermsen
You’ve worked hard for many years building your business and positioning it for sale. Don’t fall into the trap of taking your foot off the gas and coasting to the finish line.
It can take to 9–12 months to properly prepare marketing materials, do the buyer research, market the business, negotiate an accepted offer, and navigate through the due diligence period to get to the closing date.
Too many times we have seen sellers getting comfortable with the idea that they are retiring, and they don’t finish strong. You’ll need to keep driving sales and profitability right up to the end to make sure you maximize value. A buyer can change his thoughts regarding purchase price and deal structure, or change his mind about completing the deal altogether if the numbers decline during the periods of marketing, negotiations, and due diligence. We ask our clients to continually send us updated financials as we work through the process. During due diligence and right up to the closing date, not only will the buyer be interested in knowing things are on the right track, but the buyer’s lender also will require the most current financials.
You’ll also need to keep in mind that the day of the closing typically isn’t the day you are finished. Most buyers will want and expect a transition period. We have seen transition periods that have lasted as little as a few days, as in the case of a paper recycler who was purchased by a strategic firm. The buyer wanted to make sure the seller was around in case questions came up, but ultimately they parted ways within a week.
On the other hand, we have seen transition periods last up to three years or more. It is most common to see a six-month to one-year transition so that the buyer can be sure to transfer all of the knowledge and relationships that the seller has built up over the years.
Don’t wait until you are burnt out to decide that the time is right to sell. If you have enough gas in the tank to get to the finish line strong and help out with the transition, you will be giving your business the best chance for a successful (and valuable) sale and transition period.
Gary Hermsen is a mergers and acquisitions advisor for Cornerstone Business Services. He has 13+ years of experience in the converting industry as an owner and former owner/operator of a paper converting company and more recently as an M&A advisor to others in the industry. Contact him at 920-436-9890; firstname.lastname@example.org.