I like to introduce myself as “being one of the luckiest people you will ever meet!” Throughout my career, I’ve been in the right place, at the right time, with the right team that has the right solutions, and a little bit of capital. I also share that “luck is when opportunity meets preparedness!” and that “the harder I work the luckier I get!” I also believe that I’ve earned my MBA from the School of Hard Knocks.
There are a couple big lessons that I have learned:
- Find the right team of professional advisors to assist you; partners who have a global database of buyers and a process that is proven effective
- Be well educated, informed, aware and prepared as far in advance as possible
- Due diligence takes time and is critical to a successful transaction
- Culture is incredibly important to the integration of your company
- Going forward is part of the success, and you need clearly stated goals here, as well
Selling a company is one of the most difficult and important things you will do. There are plenty of critical decisions that you will have to make before, during and at the end of the process. Each action taken will be part of the biggest decision of your life and define the success of the final outcome. But when you’re doing your first or your second or your fifth deal, there are plenty of lessons that you continue to learn along the way. As someone that has sold a number of companies I created, there are a lot of details and lessons that I’ve learned that now allow me to really ensure that companies are able to reach their Optimal Outcome, and not only survive but thrive through the process.
The Right Team
There is one lesson that is very obvious for anyone that has had the opportunity to be sold with Corum on their side. It’s that there needs to be a team on your side when you’re preparing for the sale of your company, getting it out in the market, vetting the buyers, negotiating term sheets, excelling through due diligence, ensuring the long-term success of your company and the team, and achieving the objectives of the both the seller and the buyer.
My colleague, Martin Lowrie, wrote about why the team-selling approach that Corum takes is incredibly helpful to our clients. Having the right M&A team, legal team and internal team can make a significant difference. Having qualified people on your side, the collective IQ component, also ensures that you are better able to understand all the good and all the bad of your choices and make the most informed decision possible.
Education and Preparation are Key
I have always been a big believer in lifelong learning: life is full of lessons, and either we learn them or we are destined to repeat them. The earlier that you prepare, the better off your team and company will be. Preparation will position your team as professional, prepared, and ready to complete all the intricate details in a timely fashion. Attending events like Corum’s Merge Briefing or Selling Up, Selling Out is extremely helpful at every stage of your determination to sell. You will hear a lot of experienced advice at events like WFS’s Growth and Exit Strategies conferences, too.
At each of these events, you’ll hear a unique perspective on the M&A process, all from professionals who have lived the experience. You’ll learn very specific elements of the M&A process. Sometimes you’ll be hearing just from us, but at events like WFS, you’ll be learning from a diverse audience of people that have been through various parts of the M&A process, many whose careers are built around buying companies. Who better to learn from than the buyers? Corum does a webcast (the 2nd Thursday of each month) where we dive into current market valuations in the 6 main sectors and 30 subsectors; answering frequently asked questions in M&A, and we regularly include interviews with sellers and buyers. It’s a great learning opportunity for anyone interested in M&A.
As someone who has been on both sides of the M&A table, some problems that I encountered early on were things that I would see more clearly from the other side of the table years later. Getting your company ready for the transaction is also incredibly important. While some people start companies with the intent of selling and have already positioned themselves for the sale of their company from the get-go, many do not, and need to catch up to exceed the expectations of the buyers.
As an Eagle Scout, the motto of the Boy Scouts of America is “be prepared.” It is always easier to be prepared than it is to have to become prepared. You may need a little bit more time in order to get yourselves properly positioned for the sale, so the sooner you get started the easier it will be.
Due Diligence
One of the most intimidating parts of the process of selling your company is the due diligence process. I have a due diligence checklist that I’ve maintained for over 30 years going back to my first VC round; it is 11 pages, single-spaced, and has 187 categories with many categories with subsets of required information.
One of the things that Corum does is ensure that the sellers are aware of what due diligence is going to be and how important the process is to completing a transaction. Even with our help, the process is stressful. By aggregating as many of the details as possible in advance, you can ensure that you’re getting everything lined up and decreasing the amount of stress that you’re dealing with when you’re in the thick of the due diligence process.
For some companies, the process of due diligence is quite quick. Some companies can get it done in 30 days or so. Last year, I chaired a Buyers Panel at the NYC WFS with representatives from Accenture and IBM on it. Both highlighted that they are able to close a transaction in an average of 37 days primarily because they do a lot of the due diligence in advance of issuing an LOI, but also because they look to acquire companies who are prepared, and ready to work efficiently with professional buyers. Some buyers may introduce some interesting elements such as Google wanting to interview everyone in the company before they acquire it, they want to understand and have places for each of the employees after the deal, but also to offer career paths and growth for the individuals.
Integration and Culture Ensure Future Success
Success isn’t just the sale of the company. This was a lesson that I learned the hard way as I lost a best friend and business partner when we were selling a company; I was only focused on closing the transaction as I got burned out by the closing process. 30 days after closing, I left to start a new company. Because I didn’t care about the after effects and he cared deeply about it, we parted on not as friendly terms and went over a decade not speaking to each other. I had tried many times to patch things up, but he was too hurt by it. He recently passed away from cancer, and I never got the chance to apologize and rebuild our friendship.
Success is not determined once the company is sold. It isn’t the internal rate of return for the investors or profits from selling the shares or assets. A truly successful transaction is based on the long-term success of the company, on-going customer satisfaction, and the team you built all continuing to grow and succeed long after the transaction has closed. In order to get to this point, you’re going to have to work with the buyer early on in the closing process in order to integrate your company purposefully into the acquiring company and ensure that the right cultural fit is maintained long after the closing.
The net-net is the people are the assets, and they need to be properly treated from beginning to end. True success isn’t measured in enterprise value, although getting a strong EV certainly helps!
Another key aspect of long-term success is to establish early goals and objectives for your team after closing. This helps everyone feel like they are an integral part of the deal, and I’ve always believed that as you create positive momentum, building more positive momentum is easier to establish.
Conclusion
Getting a good deal is a lot of work. Regardless of how many people you have on your side, there are going to be some lessons that you can only learn by going through the experience and learned along the way from others that have “walked that mile in your shoes.” At Corum, our dealmakers have all been on your side of the table. We understand that this deal, whether it’s your first or your fifth is one of the most important events of your life.
We at Corum will be able to spot many of the potential problems before they become actual problems. Without these lessons, and avoiding the School of Hard Knocks, you will be able to get the most of your deal and reach the Optimal Outcome. So whether this is your first deal or your tenth, you’ve made a great first step towards getting the most out of it by being active in your deal-making learning process.