23 February, 2023

The ACG Capital Conference in San Diego is a premier event for middle-market deal professionals. Private equity investors, bankers, and executives from around the world attend in order to network, learn about industry trends, and explore new opportunities. Keynote speakers and panel discussions cover a range of topics such as ”How to Effectively Prepare for an Optimal Sale Transaction” and “From Raising Capital to Exit.”

Steve Monterosso, Chief Revenue Officer at ShareVault, had the pleasure of sitting in on the ”How to Effectively Prepare for an Optimal Sale Transaction” panel discussion. Here are Steven’s key takeaways and his thoughts on the topic:

When it comes to selling a business, effective preparation is key to achieving an optimal valuation in a sales transaction. Jeremy Holland, Managing Director at The Riverside Company, discussed how important it is to be deal ready.

So what does deal ready mean? Let’s explore the most important ways to prepare for a sale transaction and maximize the value of your business.

  1. Get your financials in order: A potential buyer will want to review your financials to assess the health and profitability of your business, so the first step in preparing for a sale transaction is homework - collect and organize your financial statements, tax returns, contracts, and other financial records. Double-check to make sure they are accurate and up-to-date. Since these records are highly confidential, store them in an online archive that is encrypted - like a ShareVault virtual deal room.
  2. Determine your business's value: Knowing the value of your business is essential for setting a realistic asking price and negotiating a sale. There are several methods for valuing a business, including the market approach, income approach, and asset approach. Consider hiring a professional appraiser or valuation expert to help you determine the fair market value of your business. If you are using a secure virtual deal room, you can provide limited-time, password-protected access to these third party experts during the appraisal and valuation process.
  3. Get your team in place: Selling a business is a complex process that requires the expertise of several professionals including attorneys, accountants, investment bankers, deal brokers, and other financial advisors. Assembling a team of qualified professionals to help you navigate the transaction and ensure that your interests are protected speeds the process and optimizes the outcome - a point agreed upon by all four panelists.
  4. Identify potential buyers: Once you've determined your business's value, the next step is to identify potential buyers. This list may include competitors, industry investors, private equity firms, or individual investors. Consider reaching out to a business broker or investment banker to help you identify potential buyers and navigate the sales process. As with third-party analysts, you can provide limited time, password-protected virtual deal room access to brokers and potential investors.
  5. Clean up your business: When you sell your business you’re under the microscope. A potential buyer will want to see that your business is well-run and profitable. Elliot Peters, Principal at RA Capital Advisors, commented during the panel discussion “take care of your problems far in advance.” Take steps to clean up your business by eliminating non-core assets or unprofitable product lines, improving your financial performance, and resolving any outstanding legal or regulatory issues.
  6. Develop a sales strategy: A smart, well thought-out sales strategy is essential for maximizing the value of your business. Weigh different strategies: Do you want to sell the business as a whole, or is it better to break it up into separate assets or divisions? Timing is another essential element of your strategy, as important as the terms of the sale, and your negotiation strategy.
  7. Prepare for due diligence: “Time is not your friend and systems need to be up to snuff,” noted Paul Johnson, Co-Chair, Mergers and Acquisitions Practice Group at law firm Procopio, Cory, Hargreaves & Savitch LLP in San Diego. The backbone of your preparation is due diligence, the systematic organizing of all financial records, contracts, partnership agreements, legal and regulatory documents, and other key business records. Potential buyers will scrutinize these records to assess the company’s value and potential risks. An online deal room provider like ShareVault speeds the process with its Due Diligence Checklist, a template for organizing the many confidential documents needed and archiving them in an ultra-secure online repository. ShareVault also offers specialized software called Dynamic Native File Protection (DNFP), that protects the generation of your deal sheet and other work-in-progress documents, and Collabloop, software for your team’s collaborative redlining review of the final documents. Once you have all your documents ready for buyer review, take time for mock Q&A’s to ensure you are prepared to answer questions and provide additional documentation as needed.

In conclusion, the ACG Capital Conference was a great source of valuable tips on “How to Effectively Prepare for an Optimal Sale Transaction” and other topics. By getting your financials in order, determining your business's value, assembling a professional team, identifying potential buyers, cleaning up your business, developing a sales strategy, and preparing for due diligence, you'll be well-positioned to maximize the value of your business and achieve an optimized sale transaction.