Selling your business is not just a huge leap of faith—it’s also a way to financially benefit from your life’s work at your business. As much as every seller would like their M&A transaction to go 100 percent to plan, most owners don’t plan from the beginning a winning strategy.
At Kratos Capital, we know the red flags that are deal killers. Our aim is to help prevent you from making transactional mistakes. If you’re new to the sell-side experience, these five deal killers are problems to look out for when planning your transaction.
1. Failing to Show Economic Value/Benefit to the Buyer
As much as you’d like to accomplish a sale based on your word that your business is great, this isn’t enough evidence to convince a buyer to pull the trigger on your deal. Take the time to step back and evaluate the degree of synergy between your business and the buyer’s wants and needs. Ask yourself some serious questions:
- What are the synergies that my company will bring to theirs?
- Is this an add-on or stand-alone acquisition?
- Why do they want to buy my company?
- Does my business help accelerate an exit timeline?
2. Underperformance of the Business
Yes, the transaction process is one that takes time and energy to successfully complete. However, focusing too much on the sale process and shifting your attention away from day-to-day operations can be detrimental to your transaction.
Nothing will turn off a buyer more than a business that begins to underperform mid-transaction. Remember, your buyer enters the deal with the promise that your business will perform consistently and be worth its value when the ink on the closing documents dries. Failure to perform not only causes buyers to lose faith—it also drives down the value of your business because it no longer meets the projections the buyer expected at the beginning of the process.
3. Lengthy Transaction Process
No matter how diligent your mergers and acquisitions broker is, your transaction will take some time. It is critical to eliminate avoidable delays in the process.
To make your transaction run as smoothly as possible:
- Don’t procrastinate when providing information a buyer needs;
- Always be prepared to answer questions about your business; and
- Put strict deadlines and milestones in place for your team.
4. Not Using a Qualified M&A Broker
Having the right M&A advisory team on your side is critical to receiving the maximum value for your business. Your brokerage team should be experts in your industry’s dealings, should be a high-stakes negotiator during the acquisition process, and should put your business goals and needs first.
5. Discrepancies During Due Diligence
Accounting discrepancies discovered during due diligence are huge red flags that could kill your deal. Before even starting a sell-side deal, make sure that your business has accurate financial statements, zero taxation issues, and a credible financial story that you can present to a buyer with documented evidence.
Kratos Capital, LLC Lets Nothing Fall Through the Cracks in Your Transaction
Don’t put your life’s work in the hands of an M&A firm that only cares about their cut in a deal. Kratos Capital is a client-centric firm that specializes in mergers and acquisitions within the middle-market. We are experienced, knowledgeable, and committed to giving each of our clients the results they want from their sell-side transaction.
Interested in starting the process? Contact us today to find out more about how we’ve helped businesses like yours in the past.