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How to prepare your company for an acquisition

OldStreetMedia
Kennedell Amoo-Gottfried
Published
June 14, 2022
Modified
September 16, 2022
How to prepare your company for an acquisition

There are a number of reasons why you may want to sell your company - maybe you want to focus on other things in your life, or you don’t see much more growth for the business itself outside an acquisition, or some other reason.

In any event, you can’t just jump into a sale without due preparation beforehand. 

What do I need to think about? 

Structure and motivation

The first thing you need to think about is what you’re looking to get from the deal, starting with exactly how much of the company you want to sell. If you are talking about an acquisition, then it will be at least half of the business, but this can be typically split into one of three categories: 

  • Full sale: Selling off the whole business. 100% stake. 
  • Joint Venture: Typically a 50-50 split of ownership. You and the new owner will have equal control of the company.
  • Partnership: Selling a majority, controlling stake in the business and potentially keeping something like 10-40% of the share equity. Will mean the new owner will have the controlling say but you are still involved in the decision making. 

Part of deciding which of these you want to go with is thinking about what it will mean for you beyond just a financial standpoint. You need to think about what it will do for your career, your legacy, the future of the brand that you have spent a significant amount of time building into something valuable. 

You may have a specific buyer in mind from when you start the process, but if you don’t, then spend some time thinking about what kind of buyer you want to take the company forward. What is their profile like? What are their culture and values like and how much does that matter to you? 

Even if you do just see it in financial terms, if you want to keep a minority stake in the company, then it is important to consider the extent to which the buyer has the ability to grow the company and generate income beyond just the initial acquisition payout.

Think also about the price you want to sell at. You will need to look at the current state of the market and the average multiple that companies are selling for as a baseline for negotiations.

Sort out your affairs before you begin

Possibly the best thing you can do to make the acquisition process smoother for the buyer, particularly during their eventual due diligence, is to get your house in order. This means conducting your own due diligence ahead of time and preparing answers for any questions they may have. 

This means getting all information ready with regards to your financials, your sales channels, information on your market and competition, on your tax history, your marketing activity, your suppliers, your intellectual property, any legal issues you are involved in and anything else you anticipate they may need to know before making the decision to buy. 

Get consensus and involvement

If you are the sole owner of the business then you make the final decision, but if there are other shareholders involved, they can complicate the deal, or even stop it completely, if they are not on board. So make sure you are all on the same page in terms of the goals and the rationale for the sale. Having the involvement of your management team is also important, as this will have a significant effect on them, too, and the new owners will likely want to keep them on after the deal. 

The new buyer will also want to know that the company’s main clients and customers will remain after the deal closes, too, so make sure that you let them know with enough time and massage out any concerns they may have. Having an important client leave has been known to scuttle major takeovers. 

Bring on specialists

This is especially important the bigger your company is. Remember that even as you are going through an acquisition process, the company will still need to be operating, so you cannot reallocate all your business resources into the sale to do everything in-house. This means you will need to bring in expert advisors to guide you through the legal, technical, financial and M&A technicalities involved in the sale.

Business continues after signing

Just because you’ve signed an acquisition deal doesn’t mean you immediately pack up and go home. You need to make sure that everything is ready for a seamless transition to new ownership - this means making sure you still place the necessary orders and put the necessary plans in place for the next few months, so that the new owner can just pick up the keys and not have to worry about launching from scratch. You can’t sell your business if you don’t have any inventory in place.


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About us

Threecolts acquires, launches, and grows eCommerce software & services, and owns other stellar businesses including Old Street Media, HotShp, SellerBench, Tactical Arbitrage, Bindwise, RefundSniper, ChannelReply, and FeedbackWhiz.

Old Street Media supports businesses with their advertising, inventory management, and other eCommerce services. We collaborate with over 4000 brands and have generated $600M in sales in the past year.

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