Five Keys to a Successful Company Sale

This is the first post in our series focusing on maximizing company value and the M&A process

Between the hot market, rising valuations, and the growing pressures of running a business (COVID, hiring, employee retention, supply chain, inflation, etc.), RVR is working with an increasing number of business owners that are considering the sale of their company. As we help our clients explore their options, we like to caution both the criticality and considerations of the decision to proceed.    

Below are RVR’s five key tenets for successfully navigating an exit, developed from our extensive experience in the industry:   

  • Preparation is key to a successful exit  
  • Company weaknesses must be addressed   
  • The best exits maximize value while balancing optimal transaction structure    
  • Be prepared to drive the buyer’s confidence as to their ultimate return on investment   
  • Understand that challenges will arise, but we can and will work through them    

We know from experience that just packaging a company to sell and hoping there will be buyers is not a winning strategy. Understanding how to best present your company’s value and improve its position in the market is the best approach to meet and exceed your goals and expectations throughout the exit process. Following the points below will allow you to fully understand the big picture of your company and maximize its value.   

1. Preparation is Key to a Successful Exit   

Preparation comes in two critical forms. The first is to truly understand what drives the value of the business, identifying your company’s unique value proposition, determining the company’s profitability drivers, and identifying continued growth opportunities. The second form of preparation is defensive – determining the company’s weaknesses, identifying what will come up in due diligence, and understanding what will impact valuation. With these answers, you have the framework to decide if the time is right to explore an exit.    

2. Company Weaknesses Must Be Addressed   

During the preparation of your company for sale, there may be items that must be addressed to avoid an impaired valuation or, worse yet, prevent the closing of a deal after a long, emotional sale and due diligence process. As these items are identified, RVR’s long-standing knowledge and experience in business consulting can help address and solve these critical items prior to the start of the sales process and identification by potential buyers.  

3. The Best Exits Maximize Value while Balancing Optimal Transaction Structure    

Sellers tend to focus on their sale price over all factors. While the total amount of transaction proceeds that come from a sale is a top measure of success, the amount needs to be balanced by the transaction structure. As an extreme example, negotiating an additional five percent in enterprise value isn’t worth it if it means the structure is tied to a much higher percentage of contingent (earn-out) compensation.    

4. Be Prepared to Drive the Buyer’s Confidence     

The key to maximizing value in a transaction is to impact the buyer’s perception. Top value will be achieved when the buyer believes that risks will not be a major impact, that they have to be competitive with their bid to purchase the company, and, most importantly, that they believe that they can meet or exceed their return objectives. To help the buyer gain confidence in their return on investment, we must clearly lay out the growth possibilities in the target market and the ability of the company to scale to meet the opportunity. Understanding the growth plan and conveying it properly is the single greatest controllable impact on valuation.    

5. Understand that Challenges Will Arise, but We Can and Will Work Through Them   

As you work through your company’s transaction, you will face challenges. Undertaking a sales process is stressful, both for you and for your employees. As a leader, you must continue to focus on your business and ensure that you meet your forecast. Having a clear plan and outside assistance will allow you to focus on operating the business while your advisors drive the exit process.     

Working with RVR ensures that you have the support of an experienced group that will help your company from both a transaction perspective as well as from an overall business consulting perspective, truly differentiating our firm as a partner in both growth and exit.   

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The RVR Consulting Group team has extensive experience in the merger and acquisition process, and many members of the team have owned and sold multiple businesses. We are available for private meetings to discuss your situation and provide input on a potential exit process in greater detail. Please contact Frank Fontneau via email ffontneau@rvrteam.com to schedule a time to meet.