Making an acquisition or selling a company is as much a game of timing as it is anything else, and having the right fit at the wrong time is particularly frustrating. Generally, poor timing often boils down to one or more of the following constraints:
Funding Advanced Notice. While the credit freeze has started to thaw, it is difficult to rush a transaction through. Proper due diligence by the buyer and the bank or equity source is critical, especially when maximizing the use of leverage in an acquisition.
Seller Preparation. Private companies can be caught off guard by due diligence. Since many do not need to provide their financial information to financing sources or outside investors, statements may be prepared on another accounting method not in accordance with GAAP, interim reports can be irregular and certain activities may be driven primarily by tax benefits. Such practices are generally fine for a private company, but can lead to deals being delayed or halted due to the lack of understanding of results from the buyer’s perspective.
Strategic Priorities. From the buyers’ perspective, the deal just isn't really what they are looking for to achieve specific strategic objectives. From the seller’s perspective, there is too much anticipated growth to sell now. What do you do when faced with the right deal at the wrong time?
Be patient. Utilize quality advisors and give the other side time to prepare for due diligence.
Find solutions. If a seller wants to keep milking the “cash cow” for a few more years, offer insight as to the potential downside implications, particularly if the key owner does not have a solid succession plan. There may even be opportunities for a strategic partnership to better understand the value of aligning the two organizations.
Be flexible. Not every buyer/seller is going to fit with all the desired criteria. If the ideal isn’t there when desired, don’t ignore strategic priorities and take whatever is available.
The more prepared you are as a seller and the more qualified opportunities you have in your pipeline as a buyer, the better positioned you are to hedge against the timing issue that may hinder a great potential opportunity.
For more information, contact Tom Bechtel at firstname.lastname@example.org
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