FAQ – Frequently Asked Questions
What you’ve always wanted to know
Preparation is a key factor in any transaction. The better prepared a business owner is for the sales process – in terms of administrative items such as financial reports, documentation, accreditations, sales contracts – the easier the company sale process can be.
We have clients who have successfully sold with ArsCorporate 4 years or more after first contacting us. Many meet with us and, following our advice, decide to implement an action plan to improve their company’s saleability.
Take a step back and analyze why a buyer would buy your business. Is it your intellectual property, your client base, your staff, the specialized and niche skills you possess? If you start today to examine your strengths and weaknesses as a company, then there is time to make a positive change to maximize the value of your business when the time comes.
The first thing, you need is specialist advice, as selling a company is complex and time-consuming. Professional representation is essential, even if you really want to sell to this buyer and feel it is the best option for your business.
The other thing to keep in mind is that the potential buyer clearly has a strong motive to acquire, and that may mean that your business is desirable to other buyers as well. What do you miss out on by not approaching other companies? Will you get the best price and the best result for your clients and staff if you only negotiate with one interested party?
With ArsCorprate’s customized service, you can start negotiations with your interested party, while exploring other sales options as well. You may be surprised to learn that in many cases, many business owners who talk to us after such an approach actually sell their businesses to another buyer.
This, of course, depends on your sector and your area of business operations.
The most obvious buyers to target are usually the main regional and foreign competitors, or larger companies offering similar or related products or services. But we regularly identify the best buyers to be complementary buyers, both in your home country and internationally – over 60% of the transactions advised by ArsCorporate involved a foreign buyer. A prospective buyer may have slightly different specializations or business operations, or appear at a different point in your value chain.
Each sector is different, but the main reasons for acquisition are usually strategic expansion, access to customers, and access to new technology and/or specialized knowledge.
Selling a company is a laborious process. Today’s buyers and investors are risk averse and will understandably undertake extensive due diligence and checks to ensure they are getting value for their investment.
There are many variables beyond their control that can delay a deal. These could include changes in the buyer’s circumstances (such as access to financing), or changes in the market. Regardless, it is important for any company seeking to sell to have its business management up to date. This will help to avoid unnecessary delays.
Therefore, we recommend that you calculate with at least 12 months for the whole sale process, from the moment you hire a specialized advisor to the exchange of purchase and sale contracts and the closing of the transaction. Although ArsCorporate has completed transactions in a matter of months, this is not the norm. We estimate three months of preparation before we start approaching potential buyers.
There are many different methods of business valuation. One widespread valuation method involves the use of a simplified mathematical formula. In essence, it takes your company’s annual operating profit, i.e. EBITDA or EBIT, and multiplies it by figure, usually between 4 and 8. This figure is derived primarily from a number of variables, including the industry sector, past deals, historical trading and arbitrary metrics like discounts for lack of transparency or liquidity.
These number are called multiples.
We do not believe in this method, and here’s why.
The “multiple method” does not reflect the true value of your company.
First, a company’s true value lies in its future potential and ability to generate cash flows, not its past historical performance.
Second, acquiring a company is usually strategically motivated. The value of a company is at the assessment of the buyer. That explains the huge differences between the highest and lowest offer for ArsCorporate’s client companies, that can vary up to 3 times.
ArsCorporate – M&A Advisors Barcelona Madrid – never takes a company to market with a value attached precisely because it would encourage “bartering” and bargain hunting. Only a buyer with a strategic motive and a sense of your company’s future potential can assess its true value. And it is our job to make sure that the market understands the scope and true value of each and every single company we represent.
We talk to many business owners throughout the year, and surprisingly many of them are not aware of the inherent value of their business. Some are too close to their business to appreciate its appeal. Others are looking to close the business because without a clear succession plan they feel it is their only option.
Your business and your company do not start or end with you. Your customers, your intellectual property, your contracts, your staff’s expertise, your brand, your portfolio, your relationships, your reputation – all these things have potential value to a buyer.
A key driver for many company owners is to ensure not only the best future for their company, but also for their staff. Major shareholders may view staff as friends, not just colleagues. In a family business, relationships can be even closer.
ArsCorporate understands this – and will work with you to find the right option for your company. We never force you to accept or reject any offer. We advise you on a communication strategy that will help you explain the sales process to your staff, at the right time. Open, honest, communication is key, and the right sale can rejuvenate a business, delivering new and exciting opportunities for your team.
Usually, the buyer is not interested in buying your business and instantly getting rid of the experienced employees, the very people who have helped your company succeed in the first place.
Let’s look beyond price
Go further, safer and calmer with your decisions.