August 10, 2020 HMA Website

Now Is the Time: The Partner’s Notebook, Tom Marx

Now is the Time

Now may be the time to lay the foundation for a successful business sale or acquisition.

For many businesses, indications are that a window to buy or sell will likely open sometime in Q4 of 2020 and extend through much of 2021. There are several reasons for this premise. It appears that we are beginning to understand and come to grips with consumer behavior and economic uncertainty, as well as current challenges navigating the lending environment to include the short-term effects of pandemic-related assistance programs.

As such, we believe now is a good time for both buyers and sellers to take the necessary steps to prepare for a future transaction. Buying or selling a business is a deliberate process that takes significant focus to properly prepare. In virtually every case, the amount and quality of preparation determines the ultimate success. The analysis, data gathering, and documentation required during the M&A process is extensive and difficult for most businesses to balance with normal operations. The result is that this foundational work is often rushed and incomplete, and as such, results can be less than stellar.

Relative to selling a business, we have consistently stated that preparing a business to sell is optimally a multi-year process. However, good results can be achieved fast-tracking the process but will require three-to-four months of dedicated work. The outcome of such work should yield a clear understanding of the business owner’s expectations, a complete set of marketing materials backed-up by market and competitive research, and a fully developed target list of likely suitors. The critical element in all of this is to provide a realistic path that meets the seller’s objectives, goals, and expectations.

Here are some of the things that need to be done to maximize the chance of selling a business:

– Define owner’s objectives
– Understand the business operations
– Business valuation range
– Organize financial documents
– Market and competitor analysis
– Load documents to secure dataroom
– Develop marketing materials
– Create target buyer list

With respect to Buyers, they are in a similar situation right now. With valuations being debated and some unusually onerous lender terms, there is an opportunity now to develop a strategy and create an acquisition profile that will generate long term value for the company. Typically, this requires a slightly shorter preparation period overall with a larger portion of time spent on strategy development.

– Strategy and goals
– Market research
– Target profile
– Target list creation
– Priority ranking review
– Banking and borrowing limitations
– Target analysis
– Integration and cultural strategy

By beginning the preparation process now, the critical strategy and foundational work will be completed to take advantage of market conditions at the end of the year or the beginning of next.

Time and time again, we have seen how investment in the preparation phase significantly increases the likelihood of a smooth and successful transaction for both buyers and sellers.

Hart Marx Advisors has developed programs available to work with your team during what we see is a clear upcoming window of opportunity. We stand ready to create a custom strategy and develop the materials necessary to get you running out of the gate. Whatever you do, be prepared!

Please contact us to learn more.

Tom Marx
Senior Partner
Hart Marx Advisors