You’ve built a successful business. You’ve made up your mind. You’ve focused on the pros and cons. Now you are contemplating selling the business. Once the decision has been made to go forward, often the first calls and conversations are with your trusted advisors. Namely, legal counsel, your accountant and your banker. However, an often-overlooked advisor is a valuation expert.
A valuation expert can help the company position for sale in the following ways:
· Strategize on how to maximize company value by identifying potential cash flow improvements;
· Calculate or opine as to the company’s fair market “floor” value for internal planning purposes;
· Calculate or opine as to the company’s fair market value showing different scenarios after profitability improvement assumptions and/or considering buyer specific synergies;
· Obtain key industry data on bench marking, multiples and other information; and
· Challenge assumptions in the financial projections and walk through company specific risk factors.
The valuation expert should ideally be independent of any intermediary (e.g. investment bank or broker). Sometimes this is not always the case, but if the valuation engagement is on a fixed fee arrangement versus a commission or success fee the parties may have more confidence that the analysis is unbiased. I firmly believe that assembling the right advisory team is essential when beginning the sales process. Along with the customary advisors sellers should strongly consider retaining a valuation expert.
