Anticipating Changes in Your Company’s Market
When the daily management of your business becomes a source of stress or fatigue, and problems become increasingly difficult to solve—such as recruitment difficulties, heightened competition, governance challenges, the need for CAPEX not financeable by operations or banks, etc.—it may be relevant to consider a sale. Additionally, the imminent approach of retirement age for management or the observation of increasing consolidation in your sector can be additional signals. Analyzing the degree of market consolidation to determine the best timing for a sale will help optimize the valuation of your company.
The foresight of regulatory, technological, or environmental changes in your sector and their impact on your business can also be considered to assess the ideal time for your sale. Exploring sale opportunities before facing less favorable market conditions is a prudent approach.
Advantageous Situations for a Sale
There are several timings that favor a sale: when you feel your company is flourishing, when your order book is well-filled, when profitability has been sustained for several fiscal years, and when your company is self-sufficient, etc. These elements are initial signals favoring the right timing to sell your company.
Furthermore, a low level of debt can also be an asset for selling your business. Selling at the end of repaying debt in a leveraged buyout (LBO) can favor an ideal momentum. Opt for a sale when your company is still able to pursue potential growth, whether through internal or external growth. Your advisor can help identify and reveal your potential in these areas.
In this perspective, we observe three key periods that generally coincide with a momentum for selling your business: a growth period (4-5 years after creation), a transmission period (8-12 years of activity), and a period preceding decline, where buyers can see an opportunity to revitalize the company.
Choosing the opportune moment is crucial in a sale—neither too early nor too late. This momentum should be based on the analysis of your market, your company, and the consideration of your personal aspirations.
Points to Consider During the Sales Process
The success of selling a business relies on meticulous preparation: highlighting your strengths (competitive advantages) to present them to the most relevant buyers—potential acquirers—within your value chain. This preparation aims to maximize the success of your transaction.
The sales process can be a lengthy one, lasting between 5 to 12 months. Engaging an M&A advisor is essential to navigate through the complexities of the process, negotiation intricacies, tax and legal nuances, to secure the success of your operation and increase the valuation of your company.
Moreover, your advisor will help reduce the risk of errors related to inadequate preparation, hasty selection of the first acquirer without negotiation, and neglect of fundamental aspects in a deal.
