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How To Get It Right When Selling Your Company
Are you growing your company with the goal of selling it one day and having a successful exit?
Whether you already have started your company or you are settling into the starting block and getting ready to launch, it is important to plan ahead and think about how to position your company for its eventual sale.
We recently helped the founder of an Internet technology company sell his company to a public company for just shy of $30 million. It was a great result for the founder and, despite some twists and turns, the deal advanced quickly and smoothly to closing.
This deal highlighted some important issues that you might want to consider as you start and grow your company, so that you too can enjoy a similar exit:
1. Keep a Big Piece of the Ownership Pie
This founder kept over 90% of the company, so he got a very big pay day at closing.
Your ability to maintain a large ownership position will depend in part on your company’s business model and its need for outside investment.
Remember that a change in your company’s ownership can have big financial consequences in the future.
2. Focus of the Big Issues (don’t sweat the small stuff)
This founder knew the deal issues that were most important to him. He made sure that he was satisfied with the guaranteed purchase price, the terms of the earnout and the post-closing liability and indemnity obligations. Then, the other deal points moved quickly to completion.
Do your homework. Know what’s important to you. Close the deal quickly.
3. Organization Helps
This founder was organized, had an impressive command of the business details and documents and helped accelerate the deal due diligence process.
Get organized early on and put systems in place to stay organized. Your consistent efforts will help you raise money and sell your company.
4. The No-Shop Deadline Is Important
This founder paid particular attention to the no-shop deadline in the deal term sheet. The acquirer knew that other potential buyers might be waiting in the wings, and this founder used this deal tension to his advantage.
If possible, line up more than one potential buyer, so that you can leverage the situation to close a better deal.
5. Take Care of People
Take care of your employees. Provide proper incentives for success and reward them for your efforts.
Your Turn:
Are you planning on selling your company? How are you implementing the above suggestions to prepare your company for a successful sale? Let us know to help other companies start, fund and grow.
