Are you thinking about selling your company?
If so, did you know that 50 – 65% of mergers and acquisitions ultimately fail according to research? M & A firms and your attorneys will move you quickly to preparing your business for sale. If you want the deal to succeed and the sale to contribute positively to your well-being, there are some things you should consider well before you get caught up in the money trail.
Attention to the human factors will increase the possibility that the end result is a success. Being thoughtful about these “soft” issues will likely reduce the unexpected obstacles you will encounter as the deal comes together. Addressing them early in the process can
- improve the chances the sale will go through,
- save time and money invested into putting a deal together that may never succeed,
- and flag areas that will need to be worked through as the deal approaches the close.
Many of these issues seem relatively minor in the early stages. However, they become amplified as the final signing day approaches. Early identification and engagement will increase peace of mind, help to maintain your relationships and ensure that the sale will have a positive impact upon your broader environment.
Here is our list of some important dimensions that we at Marigold measure when involved in a client’s M & A process. How do you score on these points?
Have you thought about the impact of the sale upon you and your ownership group?
The immeasurable investments you have each contributed in terms of hard work, time, energy, emotion, passion, and intellectual capital can give rise to powerful emotional—and even irrational—commitments. In some ways, cashing out is meant to be the reward for all the work. But there are a host of personal and professional issues that you need to think about that accompany a sale. Your identity, daily routine, sense of meaning and purpose, relationships, role in the community, level of stimulation, etc., will all be affected by this change. A business work environment provides structure, a place where we can engage important parts of ourselves. It is all consuming and demanding, but also very fulfilling. Have you thought this through carefully?
Why are you selling?
A good answer to this seemingly simple question is the most important element. Are you tired? Burned out? In need of the money? Ready for something new? Want a more balanced life
Have you really thought about your next stage?
Once you sell, issues in your life that have been left unattended for so many years may come front and center. Your identity will begin to go through a shift that could catch you unawares. Do you have a structure in place to help you process this? Type-A entrepreneurs typically struggle with this process since their role in their business has become their primary identity. This in turn has become the way they are known in broader society and even within their family.
Do you and your partners have clarity about the sale?
What do your stakeholders really think? Do they honestly agree that a sale is the best direction for the company? These are important questions that demand transparency, honesty, and a communication process that, if it isn’t in place, should be. If your communication process is dysfunctional, it is likely to get worse during a period of transition, not better.
Are there past injustices amongst partners/stakeholders? Is the deal fair?
A stumbling block to a sale is when one or more partners feel like they have not been adequately compensated for past involvement.
Are you prepared for the infusion of cash and for its impact upon you and your family?
A sudden increase in wealth is a challenge to even the most well prepared. Wealth tends to amplify everything, both strengths and problems. Do you have the systems, relationships, and life philosophy about money and materialism in place to help you and your children survive the cash infusion?
Have you thought about succession within your family or among your partners?
The sale of a company is not just about you and your desires. Are there others within the ownership group or family who have the capacity and interest in taking the company over? Capacity and level of interest are important elements that need to be adequately measured and assessed. This isn’t something that should be left to your instincts.
What will become of your employees?
Are you concerned about who buys the company? Will they maintain your culture and pursuit of excellence?
A common problem for mergers has been the cultural integration of the two businesses. There are tools to help. But for privately held firms, there is so much personal investment in the culture of the firm and its pursuit of excellence that many struggle with giving it over to someone else. This is especially so if your name has been on the business. It is like giving away part of yourself. How will you deal with this?
Do you trust your partners and other stakeholders to protect your interests in the sale?
Do you have a quality decision-making process in place for the stresses that will inevitably arise throughout the sale? Are your relationships healthy enough to survive? Trust and open communication are the key elements to making this work. A third party who can protect your confidentiality may help you, since it is far easier to discuss these private matters with an outsider. Many times the hard business discussions fall into well worn ruts, and conversations inevitably tend to get stuck there rather than dealing candidly with the important matters involved. This is one stage where you really need to be honest, listen, and hear what your partner(s) is saying.
How well prepared are you for a sale? What else would you add to our list?
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