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M&A Insights – Mark Young, Managing Partner, CKS Advisors

Welcome to the February 2021 edition of M&A Insights. Our goal at CKS Advisors is to help you stay up to date on the Mergers and Acquisitions climate.

This month, we would like to highlight steps that business owners should consider taking when preparing to sell their company or just looking to increase the value of their business.

Start Preparing Now

  • Unlike other assets, businesses typically require extensive preparation to complete a successful transaction that yields maximum value.
  • In many cases, it takes two or more years to properly prepare a business to sell.
  • If you are ready to begin the preparation process, consider contacting an M&A advisor. You can leverage their experience and expertise to help you identify and focus on what your company needs to do to complete a successful transaction.

The following is a simple checklist of the areas to consider addressing:

  • Understand Value – Ultimately, the value received when selling a business is set by the buyer. Buyers weigh various factors when deciding purchase price, so it is important to begin evaluating your company through the buyer’s eyes – “What do they like to see from your type of company?”
  • Identify and Build Your Niche – Buyers are attracted to and will pay a premium for companies that have a niche with barriers to entry.
  • Maximize Cash Flows – The value you receive for your company is directly related to “true” cash flow. So, work towards improving cash flow now for a larger payoff down the line.
  • Minimize Risk – Perceived risk is another key component that buyers consider when putting a value on your company. It is important to mitigate risks such as customer and supplier concentrations or any others that may be of concern to potential buyers.
  • Step Up Financial Reporting– Clean, CPA prepared financials are essential for a smooth process and maximum value. Existence of performance analytics is important to buyers.
  • Review Your Assets – Buyers are not interested in unproductive assets or unsalable inventory. Consider selling or disposing of any assets that will not benefit a buyer.
  • Scale Back Your Role and Develop Key Employees – A company that “runs itself” is much more attractive than one highly dependent on ownership’s day to day involvement. Start developing or searching for key employees that can take over the operations, making for a smoother transition.
  • Strengthen and Build Relationships – Strengthening standing relationships with key customers and suppliers, or building new relationships in areas that are lacking, will reduce buyers’ perceived risks.
  • Clean-Up Your Facilities – Purchasers appreciate clean and organized facilities. Consider making improvements to your facilities, even if they are leased, to increase your business’s curb appeal.
  • Document Your Practices – In the world’s current state, documenting your practices has never been more critical. Ensure that operating processes, strategic plans, and COVID strategies are well documented.

In Summary

  • Preparing your company for sale is an intensive process but well worth the investment, which is why it is important to start today even if you aren’t considering selling in the near future.
  • The preparation checklist is a good starting point, but because every company is different, consult with an M&A advisor to effectively prepare your company and maximize value down the road.

If you would like to learn more about this subject, the M&A market in general, or are ready to take the next step to explore your options, we would be glad to meet. Please contact me at 480-351-8533 or myoung@cksadvisors.com.

This post is for informational purposes only and does not constitute an offer, invitation, solicitation, or recommendation to buy, sell, subscribe for, or issue any securities. While the information provided herein is believed to be accurate and reliable, CKS Advisors, LLC and Ashland Securities, LLC make no representations or warranties, expressed or implied, as to the accuracy or completeness of such information. All information contained herein is preliminary, limited and subject to completion, correction or amendment. It should not be construed as investment, legal, or tax advice and may not be reproduced or distributed to any person. Certain Principals of CKS Advisors, LLC are registered representatives of Ashland Securities, LLC Member FINRA, SIPC. CKS Advisors, LLC and Ashland Securities, LLC are separate and unaffiliated entities.  Securities and Investment Banking Services are offered through Ashland Securities, LLC.