by Ari Fuchs
Are you looking to sell your AV business in the next twelve months?
Maybe a near-term sale isn’t quite on your radar. Maybe your time frame is 3 years? Five years?
Many middle-market businesses have changed hands in the past several years, and the AV industry has certainly seen its fair share of activity. There is a lot of money on the sidelines looking for good deals.
The good news is that if you actually take the time to prepare your AV business for sale, you are more likely to rise to the top of a prospective buyer’s list and garner top value. How well you prepare your AV business for sale will make all the difference in its perceived value in the marketplace.
Prospective buyers look for very specific factors when developing their valuations of your company.
Whether you plan to sell to a financial or strategic buyer, sell to your management team or transfer ownership to the next generation of family, focusing on the following 6 steps will materially impact the value of your business.
It is critically important to have your AV business ready for the sale process. That means preparing it well in advance of when you’re planning run a sale process.
If you wait until you’re ready to sell to optimize inefficiencies, your greatest opportunity to build value is lost.
Look for ways to increase earnings and maximize profitability now so you will have an established track record by the time you go to market. By keeping your focus on operation efficiency now, you’ll build value at the closing table.
Buyers are interested in potential – they generally buy the future, not the past. You must be able to paint a compelling and defensible picture of your company’s path forward and the opportunities that will propel its growth in the years ahead.
Do not leave it to the buyer to understand your company’s vision for the future. You cannot count on them to do the work of selling themselves on your business.
It will be well worth your time to develop a cogent, supportable message that powerfully and logically communicates your vision of the company’s future.
Any serious buyer will perform extensive due diligence prior to consummating a transaction.
Any surprises at this stage will have the potential to negatively impact a deal. Trust is critical to a successful transaction and the last thing you want to put into the mind of a buyer is doubt.
You can avoid surprises by conducting your own due diligence process with your team of advisors prior to bringing your business to market.
Be ruthless – a prospective buyer and their team of advisors will turn over every stone – you should do the same to identify any and every possible issue that may be perceived as a negative through rigorous self-assessment.
Two areas of risk often rise to the top of the list for prospective buyers – customer concentration and vendor concentration.
If your business is highly dependent on just a few customers or vendors, it could have a profoundly negative effect on the valuation of your business.
This may be unavoidable in certain businesses, but there are still ways to mitigate the risk. Whenever and wherever possible, strive to expand and diversify both your customer base and vendor pool.
Anything you can do to reduce concentration risk will help increase the value of your AV business.
Another area of risk for potential buyers lies in your company’s dependency upon a few key employees.
If your operation is overly dependent on one or a few employees, would-be buyers may be reluctant to move forward at all unless you’ve taken steps to mitigate the risk.
Whenever possible, lock-in key employees by obtaining non-compete or non-solicitation agreements well in advance of a transaction. Try to align the financial goals of management with ownership to create a win-win situation.
Chances are you’ve never sold an AV business before, and you may never do it again.
Since this is likely the most important financial decision of your life, this is no time to learn on the fly. Make sure you assemble the right team of experienced advisors to assist you throughout the process.
A seasoned team of professionals that have “been there, done that” hundreds of times will be your best asset in avoiding any one of a thousand missteps.
The right team of advisors will have dedicated experts in accounting, tax, legal, wealth management and investment banking. Each will play a specific role in the sale process, providing you with the insight, expertise and guidance to make the tough decisions along the way.
You’re likely to get just one shot at this, and you’ll want an experienced team that will make sure you get it right.
While all of the advanced preparation can seem overwhelming, the more work and planning that you do in advance of a transaction to package and position your business, the quicker and easier the sales process will be, and the more value you’ll get in return.
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