I was delighted to chat to Alastair Greenfield at WY Partners the other day about how #founders and #businessowners can prepare for M&A and investment deals, some top tips to take to heart and some pitfalls to avoid.
Here are three key takeaways:
1. Don't skip the term sheet - this your chance to get all your aims and concerns out in the open and work out whether, fundamentally, there is a deal to be done. It is important to strike a balance: a 100-page term sheet won't do anyone any favours, and momentum is key.
Accordingly, a term sheet should cover all the main points of substance but leave the details until later, rather than giving chapter and verse on a handful of topics. That said, sometimes the devil is in the detail, particularly on earn-outs, and so a more granular approach is sensible on these points.
It is also a good idea to have your lawyer look at any term sheet - they can help you review what's there but, more importantly, flag up what isn't there.
2. Don't lose sight of the 9 to 5 - a sale or investment process can become a full-time job for a founder or business owner. This can mean that less attention is paid to the day-to-day running of the business - this, in turn, may mean not hitting revenue targets and the buyer or investor getting cold feet.
Ideally, responsibilities within a founder or management team are split to ensure that someone is looking at the deal and someone else is fully focused on the business.
3. Don't wait to get advice - it is never too early to get advisers involved. Lawyers, accountants, tax advisers and corporate finance advisers are key to ensure that your interests are fully protected across the board. Even before a deal process kicks off, advisers can help 'look under the bonnet' of your business and identify any potential issues that a buyer or investor may raise.
In particular, corporate finance advisers can really add value: not only do they understand the numbers, they will also know the likely areas of dispute on a deal (e.g. the agreement of normalised working capital) and will fight your corner on these points.
It's also important to give yourself enough time to find the right advisers - don't be afraid to speak to a number of different firms, including any existing relationships you may have. Every deal is a leap of faith; good advisers will help to narrow the gap.
I do hope you enjoy the video.
"Every deal is a leap of faith; good advisers will help to narrow the gap."