Company sales are often poorly prepared
Owners who intend to sell companies often use incorrect basic parameters to determine the value of their own company. For example, one has already heard of company sales where x times the revenue was paid and applies this “multiple” to one’s own company without taking into account industry specifics, revenue differences, etc. Or the owners calculate the “value” of the company via the capital invested in recent years. — The change of perspective from that of an investor, for whom only the future return on investment usually counts, is often difficult for owners. In addition, some appraisals simply do not determine the actual market value of the company, thereby raising expectations too high.
The sale of companies is all about high values. What was all the more surprising from the survey results was that even the majority of the companies put up for sale were not prepared for the sale at all or were poorly prepared. Probably no other market where valuable items are offered is so unprofessional on the supply side.
The most common weaknesses in the companies offered are their lack of future attractiveness. Often, the multi-year planning is not linked to implementation measures or strategies, which is why the company’s future growth, which is supposed to be above industry growth according to the numerical plans, is not comprehensible. Operational weaknesses are usually not clearly analyzed, although they represent potential for future improvement.
The risks at the companies offered are also substantial. The operating influence of the legacy shareholders is often still very high, which causes the buying interests to have concerns about the stability of the business after the purchase. In the majority of companies offered for sale, there are also many “cluster risks” on the sales side, and integrated planning is lacking.
In addition to an overly high asking price, transaction security often suffers from a company’s management that is insufficiently prepared for the sale — a “key issue” for private equity investors.
Three points to take to heart: 1. preparing the company for sale (a continuous task, not only for sales projects); 2. Do not offer to the “first best”, but develop a well thought-out sales strategy; 3. Hire professional consultants for the sales process, because they pay for themselves quickly.
The damage of a sales transaction that does not go to closing can be immense. — Consultants specializing in the sales process help to significantly increase transaction security. Serious advisors provide sellers with a realistic purchase price idea that is in line with the market. They prepare management for the sales process and help to overcome the obstacles that always arise in a sales project. Sometimes this includes talking to the families of the vendors or best friends.