Maximising your company’s value is an essential element of any successful company sale. Presenting your company in the best possible light through the use of excellent marketing methods and documentation, alongside reaching out to a wide audience of potential buyers, is paramount in ensuring that your company attains its maximum value.
Once these have been carried out, the negotiation process can be facilitated in order to further drive your company’s sale value to an optimum level. We asked KBS Corporate’s Associate Corporate Director, Tom Eatough, and Director, Matt Clancy, about the negotiation process and how to use it effectively to maximise a company’s sale value.
What does the company sale process entail?
Tom: The process begins with potential buyers being selected and brought to the negotiating table. These potential buyers will firstly sign a non-disclosure agreement (NDA) before full details of the company are revealed. This is vital to the process, as our primary concern is protecting our client’s interests. Buyer meetings then take place, and indicative offers are presented. If multiple buyers present offers, then a competitive bidding process will take place. Once an offer has been accepted, the buyer begins the due diligence process and if they are happy, the deal heads towards completion.
What can be done during this process to help maximise a company’s sale value?
Tom: One of the most important ways to maximise a company’s sale value through negotiation is to firstly create a competitive bidding environment. The best way to do this is to initially reach out to as many potential buyers as possible in order to generate interest.
Matt: It’s also important to reach out to a variation of buyer types in order to bring a good mix to the table. Different types of buyer might include trade buyers, private investors, venture capital and private equity investors.
Tom: A well organised deal structure might further maximise a company’s sale value. A set deadline for completion will invite more offers as it will put pressure on any interested parties.
What factors are most important when negotiating a M&A deal?
Matt: The negotiation process is integral to the deal, and so it is essential that the process runs smoothly and efficiently. Throughout the process, we work in close contact with professionals such as accountants, lawyers and tax advisors, and it is important to maintain good relationships with all parties, especially those acting on behalf of the buyer.
Tom: It’s also essential to prepare and plan any negotiation between two parties. Having a plan established from the outset enables us to communicate effectively on behalf of the client and this delivers the desired outcome.
Matt: As mentioned, our job is to source suitable and eligible buyers, and then facilitate a competitive bidding environment, where negotiations occur. It is imperative that we remain in control over the negotiations to ensure that we preserve a position of strength. This will ultimately drive value and leverage offers to their optimum level.
Is it easier to negotiate sale value when there are multiple interested parties?
Matt: Having multiple interested parties definitely does drive a company’s sale value, especially if the buyers are competitively bidding against each other. However, at KBS Corporate, we place a strong emphasis on finding the best quality of buyer. The ‘right’ buyer may not necessarily be the most obvious buyer; they may own a company within the same sector as our client, or specialise within a similar market. If the right buyer comes along, they will be prepared to pay more for the company in order to benefit in the future.
How can you maximise the number of parties brought to the negotiating table?
Tom: We create attractive and professional presentational materials, which illustrate the value drivers and key attributes of our client’s company. Including a financial model to articulate the company’s financial future is a good way to attract buyers to the negotiating table, and these often play a key role in leveraging premium value from a transaction.
With such material, we aim to explore every possible avenue in our search for the perfect buyer. KBS Corporate targets a wide variety of buyer types using an in-depth and comprehensive research process, using our database of active acquirers, institutional buyers, overseas buyers, a database of over 10,000 professional contacts that actively represent acquisitive clients, and over 50 internet based M&A platforms which attract UK and global buyers and advisors. This is the best way to maximise the level of interest shown in the company.