Challenges in M&A transaction for Seller

M&A is not an easy-going process for both sellers and buyers. Where a buyer is concerned about getting the deal done in the most reasonable price and benefits, the seller is concerned about making that possible and getting the right price for their business. Sellers face many challenges while going through M&A transactions.

The process begins with having all financials balanced and documents clear for due diligence. Having prepared well for due diligence helps the seller to address weaknesses and anticipate the questions of potential buyers; however, with the help of investment bankers and lawyers, and methodical organization and project management, this taxing process provides considerable benefits.

Seller tends to initially underestimate the complexity of the process but as time goes, the seller has to keep skipping between managing documentation, employees, clients, and other tasks which leads them towards a deal disastrous. Sellers and their management team sometimes ignore business once they set it out for selling. But to maintain the clients and have consistent growth is important for selling a business smoothly.

As previously mentioned, the seller should be ready for due diligence, as soon as the thought of selling the business occurs to them. The more prepared the company is, more easy and quick it is to sell them. Start with having all the financials clear and in place to avoid any financial related risks. To put this through, the company needs to build a strong team. It can seek the help of the external experts in corporate counseling and some financial advisors along with their management expertise.

Financial advisors are preferred to having leverage. As the advisor would solely focus on the transaction, it can reach out to more buyers and handle their queries unlike the management executive of the company who is supposed to look after the on-going of the business as well. Also, having an advisor will help in increasing the worth as it will include competitive dynamics. Having investment bankers on board will help them with negotiations and contract processes as they are well versed in the terminology and process.

Also, hiring legal advisors is not a bad idea. Many legal complications can come across during transactions. Also, the documentation part becomes easy with the help of the legal advisors onboard. It also helps protect the confidentiality and manage NDA’s with the buyers and people involved in the transaction.

Having people with project management skills onboard, help to set project management tools to handle data and requests regarding the transaction. Project management tools can increase efficiency and communication, which results in faster deals and reduced burn-out. For example, for the smooth management of so many people and tasks, it is suggested to set a dataroom. With the help of dataroom, it is easy to manage things virtually. Further, this dataroom or a board version of it can also be used while dealing with the buyers for due diligence.

After going through all the marketing and solicitation period, ask for indications of interest, which tend to be nonbinding, but provide a range of value for what the buyer would potentially pay. Thereafter, the arrangement of commencing management presentations is to be done to allow for parties to meet face-to-face where they can ask more detailed questions.

Conclusion

Considering the reach of technology, while selling a business also, it is advisable to do most of the things digitally and virtually. Other than this, having a great team on board and all the documentation clear, helps sell a business with the least possible challenges. However, the seller needs to pull their socks since the day they decide to sell a business and work till the day the business is sold; sometimes also after that. But in the end, with the right process and efforts, the seller can sell their business at a worthy price.