Around the Web: A Week in Summary
The recent Axial article entitled “Why Advance Preparation is Key to a Successful Deal” explains that many CEOs looking to sell or raise capital often underestimate the process needed to reach these goals. While much of the process seems simple and straightforward, there are actually many more intermediate steps that take more time and require much more relationship building than one may think.
The article suggests a seller start the process early and find an M&A advisor with experience in their field for assistance in determining what outcomes to expect from the sale. Starting early affords the seller the opportunity to build more relationships with advisors, potential buyers, potential lenders, and any other person involved in the transaction, which will ultimately lead to a bigger pool of choices to choose from when assembling the necessary team to sell or finance a business. Early planning will also give the seller some wiggle room regarding the length of the selling process, as many factors will affect how long it will take from start to finish.
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In the recent Divestopedia article “EBITDA Engineering Before Selling a Business”, the author explains the process of “smart exit planning,” or a process used to help get a higher business valuation through certain accounting practices involving EBITDA. The outlined accounting practices to increase EBITDA involve:
- Capital Leases vs Operating Leases
- Capitalization
- Inventory
- Revenue Recognition
- Cut-off
Financial statements are ultimately the property of the owner, and while the author discredits any sort of fraud or illegitimate practices, he notes that owners are responsible for their accounting practices and that the method they choose is their free choice.
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The Entrepreneur article “Seeking Acquisition? What You Can Learn from Time Warner’s Sale to AT&T” outlines some important points that arose from the Time Warner/AT&T deal that you can learn from and apply to your own transaction process. Aside from the obvious point of driving your own business value in the best way possible, the author suggests steps to take to make your company look as attractive as possible to a potential acquirer.
- Get all your ducks in a row: Knowing everything about your business, from financials to people and products, is very important.
- Ditch the DIY mindset: Don’t try to do it all yourself. M&A professionals exist to help you with a sale and get the most out of it.
- Get down to brass tacks: Get on the same page with your advisors and potential buyers or the deal may fall through.
Managing a merger or business sale starts with being ready for it! Being prepared for a sale may be one of the most important, if not the most important, aspects in the success of a merger or sale.
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