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Best Practices for Managing a Deal Flow

The successful conduct of any business transaction begins with quality preparation. This applies to the sale of a business, mergers, and acquisitions, integration, and other processes. Read on how to prepare for the sale of your big business properly.

10 essential steps to start selling a company

By following these steps, you are guaranteed to be fully equipped when it comes time to sell your brainchild.

  1. Formulate common goals for shareholders and management, who should share a vision for the sale process.
  2. Selection of a team of M&A specialists. Complement the strengths of your company with an experienced team of professionals.
  3. Develop a sales process plan to meet deadlines and provide necessary funding and resources.
  4. Structure financial data: focus on key economic indicators and management tools, and confirm the relevance of the data.
  5. Predict financial performance, and tell about the growth and profitability of the company in the future.
  6. Conduct Due Diligence, and evaluate the business (and its value) from the point of view of a potential investor.
  7. Based on the results of Due Diligence, the forecast of financial indicators and the general state of the market determine the most probable range of the company’s value.
  8. Identify various options for the structure of the deal and possible trade-offs.
  9. Estimate profit after taxes.
  10. Revisit your deal goals and adjust them as needed.

It seems simple, but it can take you months of work.

Think Like a Buyer

99% of investors are interested in the number of benefits in case of dismissal of employees, the existence of an obligation to provide jobs for key management, the conditions for concluding collective agreements, and other commitments about personnel

Good preparation starts with seeing the sale from the buyer’s point of view, what he expects from the transaction, what factors may influence his decision, and what arguments he will use to discount the price. It is essential to consider not only the apparent market and business conditions but also the situational factors of key participants in the transaction (for example, family circumstances) and the unique aspects of the particular business offered for sale.

Setting Goals

Formulating clear goals for the sale of a business is not as easy as it seems at first glance since it is often necessary to consider the interests of each of the shareholders, their family members, and employees. For example, we often encounter an internal conflict of a shareholder who wants to simultaneously increase the company’s value, no matter how much time it takes, and close the deal as quickly as possible. Another difficulty may be associated, for example, with the incompatibility of the owners’ wishes when they pursue different goals simultaneously – from raising prices to the well-being of employees.

Team selection

Out-of-control events can disrupt the sale process and distort the company’s value. Therefore, preparation for the sale process should begin with selecting an experienced team of M&A consultants. Experts will be able to control the entire transaction process, prevent deterioration of the company’s operational efficiency, help maximize the value of the transaction and, most importantly, predict uncontrollable events and manage risks.

Carrying out Due Diligence and personnel issue

The initial preparation for the sale begins with the Due Diligence process – a detailed independent audit of the company’s key indicators. The primary purpose of the audit is to identify and “cure” risks that may lead to a price reduction. First, due Diligence lays the foundation for sale by improving weak areas: technology, people, customer structure, contracts, valuation models or financial statements, etc. Later, closer to the sale itself, Due Diligence will lead the buyer and seller to a deep understanding of all the nuances they need to study for successful transaction completion.