How to Prepare for Sell-Side Mergers & Acquisitions

The process of preparing a business for sale forces owners to look at their operations from a more objective point of view than they had done until that point. …


The process of preparing a business for sale forces owners to look at their operations from a more objective point of view than they had done until that point. Many of the ongoing ‘house cleaning’ issues which don’t appear urgent in the day-to-day running of a company come to the fore when it’s time to find a buyer.

In the simplest terms, functional areas of a business which are better than the perceived industry standard will generate value for the seller. By the same token, areas which are even just a little below the perceived industry standard will do the opposite. In ensuring a business is ready for sale, the owner’s job is to maximize the former and minimize the latter.

Articulate the value of the firm

As much as a broker will sell a business as a ‘unique opportunity,’ there are thousands of similar opportunities out there which are competing for buyers. Sellers should be able to articulate the value of their business in three lines or less, just like startup founders. Understanding what exactly is being sold will also help focus on which areas require attention before the sale.

Detach yourself (and your family) from the firm

Take yourself out of your firm as part of the M&A sale process. What remains is what the buyer receives. Among other issues, this means ensuring that recurring revenue is not based on personal contacts, cutting personal expenses from the income statement, extracting personal assets and liabilities from the balance sheet, and removing offspring from managerial positions.

Clean up the balance sheet

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There are often a number of quick wins for sellers of firms to be found on the balance sheet: reducing accounts payable, liquidating under-utilized or under-performing assets and using the proceeds to pay down some of company’s debt are just some examples. It should also be clear to the buyer from reading it what their CAPEX requirements will be on acquiring the firm.

Consider your people as assets

With services accounting for over 80% of the US economy, a firm’s employees are more important than ever before. This can be one of the hardest areas to get right, as sellers seek to find a balance between their loyalty to long-term employees whose skillset may be outdated, and ensuring that the buyer is acquiring a team which can drive the firm by itself.

Where possible, renew contracts

Buyers like to see stable cash flows projecting into the future, and often that means recurring revenues from existing contracts. Wherever possible, sellers should ensure that existing contracts have been renewed for a minimum of 24 months, (even if that requires a small discount on the current terms)

Transparency about the past, present and future

Being transparent in a sale means showing the buyer everything, warts and all. This includes having accurate historical financial statements, information on previous or pending litigations, and why a sale is being sought. It also means being honest about the future prospects of the firm – buyers work on the premise that if something seems too good to be true, it usually is. If you are conducting the merger through an investment bank everything will be much more transparent.

Identify weaknesses and deal with them

Closely related to the previous point is identifying weaknesses – and dealing with them as best as possible before the business is put on the market. Sellers should ask themselves, ‘what are the three biggest weak points of this business?’ and then see how they can be resolved. The better the resolutions, the more bulletproof the sales pitch.


Aside from anything else, it’s good policy for owners and managers to maintain their company as close to a ‘ready for sale’ state as possible. This not only creates value for the owner, it also provides them with a increased flexibility in terms of timing should they wish to sell for any reason at short notice.

It’s no coincidence that companies which register strong buyer interest are also those which have a clear strategic direction, a strong internal culture, a talented team of professionals, positive financials and a comprehensive set of corporate controls in place.

Author Bio

Nate Nead is an experienced investment banker and M&A advisor with a focus on real estate, technology & software, healthcare & life sciences and consumer products. Nate works across sectors, assisting business owners in buy-side M&A,  sell-side M&A and capital formation projects. He is based in Seattle, Washington. 


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