How do I determine the value of my company?
Only the marketplace can determine the true value of a company. This requires identifying potential buyers who need the company and obtaining offers from them. The market value surfaces as offers are negotiated to their highest level.
The value of a business is a function of its ability to provide future cash flow. Strategic buyers, who bring more than a purely financial perspective, will usually pay a higher price.
Merger-and-acquisition specialists, who specialize in selling and buying companies, possess significant valuation knowledge. A discussion with an expert may provide a good perspective. Should you choose instead a business appraiser, expect at least three approaches to valuation. These may include an analysis of discounted cash flow, comparative transactions, publicly traded company valuation, or a capitalized earnings approach. For more information and insight, use the Shoreline Value Calculator to determine how different components affect valuation.
(See also "Selling a Company for What It is Worth", "How to Build a Business to Sell" and "The Company as Product")
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What is "strategic value" as it relates to my company?
A strategic buyer can leverage one or more of your company's core competencies to a greater extent than you can. Strategic value is the competency your company possesses that can be leveraged and benefit an acquirer. Conversely, it is also the value of the competencies a strategic buyer brings to your company through a transaction. When synergy exists, the value of the transaction increases for both parties. The value of the company is determined by what it can provide in the future in the acquirer's hands, not what it has provided to the existing owner.
(See also "How to Build a Business to Sell" and "The Company as Product")
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When should I sell my company?
The time to sell a company is when its future is the brightest. When we talk to buyers on behalf of a client, 65% of the conversation is about the future, 25% is about the present and only 10% is about the past. The brighter the future, the higher the purchase price.
(See also "When Time is Right, Consider Selling the Business" and "The Company as Product")
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How do I get the most money for my company?
Only when multiple buyers with different motivations to acquire your company are competing will you obtain maximum value. While it seems obvious that bidding will bring a higher price, finding multiple buyers with strategic reasons to buy your company is not easy. Companies sold without obtaining offers from competing buyers are usually sold at a significant discount. We have observed some transactions that have closed at half what a market-driven price would have generated. Most of these sellers never knew how much money they left on the table.
(see also "Selling a Company for What it is Worth" and "Common Mistakes to Avoid When Selling Your Business")
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I received an (unsolicited) offer for my company. What should I do?
The best advice is BE CAREFUL. You could diminish the value of your business overnight. Unless you are very serious about selling your company, do not go down the path with a potential buyer. And if you are serious, it would be much safer to retain an intermediary to review the offer and advise you about alternatives.
There are some rules that will prove valuable to you. Never mention a price. Keep your thoughts about selling confidential. Have discussions only with your spouse, partners or accountants. Do not divulge any information that would aid a competitor. Do not go down this path with a competitor until you have an acceptable offer from a noncompetitive buyer in hand.
(See also "Selling a Company for What It is Worth", "When Time is Right, Consider Selling the Business" and "Common Mistakes to Avoid When Selling a Business").
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How do I determine potential buyers for my company?
It is not easy to identify the strategic buyers who will pay the most for your company. We look for buyers who need our client's company. We begin the process by examining our client's strengths and weaknesses. The ideal buyer will have weaknesses that can be cured by our client's strengths and strengths to shore up our client's weaknesses. With the profile of an ideal buyer, a search through databases and Internet web sites will assist in identifying a list of potential buyers.
(See also "Common Mistakes to Avoid When Selling a Business" and "Consider a Strategic Partner to Fund Your Venture")
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What should I do now if I want to sell my company in a few years?
Planning your strategy and focusing on "value drivers" are keys to a successful, lucrative exit. The Shoreline Value Calculator is designed to show you how changes in a company's value drivers may impact its value. Also, we recommend you look at your company through the eyes of a buyer. Know who prospective buyers might be. Spend time enhancing competencies that would be valuable to them. Examine your business for intangible value. These areas offer the greatest potential for increased value. Consider alliances and partnerships, become global. Understand company and product lifecycles, and focus on the end game.
(See also "How to Build a Business to Sell" and "The Company as Product")
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How long does it take to sell a company?
The sale process normally takes six to 11 months. Businesses can be sold in less time, however it is doubtful these are sold at maximum market valuations.
It can take a month or two to prepare a professional presentation of the business. We commit three to four months to market the company and gather offers. It can take a month to negotiate letters of intent. Upon acceptance of a letter of intent, another two months can be required to complete the buyer's due diligence, negotiate the definitive agreements, prepare final documents and close the transaction.
(See also "How to Build a Business to Sell", "The Company as Product" and "Turbocharge Your Company's Value")
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Are there tricks to maintaining secrecy while I try to sell my company?
The best way to maintain confidentiality is to have an intermediary act on your behalf. Intermediaries are skilled in approaching prospective buyers without identifying who you are. They will obtain confidentiality and nondisclosure agreements prior to divulging your identity. They know what information to release and when, and can conduct offsite meetings. Intermediaries are skilled in accomplishing discrete transactions and their presence and professionalism adds to the assurance of confidentiality.
(See also "Selling a Company for What It is Worth" and "Common Mistakes to Avoid When Selling a Business")
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Why can't I sell my company myself?
As noted above, confidentiality is a concern. More importantly, it is a time-consuming process that could distract you from successfully running the business. If you ignore the day-to-day business, you run the risk of its value declining before you close. You will likely be dealing with an experienced acquirer, putting you at a disadvantage in negotiations. An intermediary can level the playing field. And it is very difficult for an owner to negotiate with multiple potential buyers without losing credibility and trust.
(See also "Selling a Company for What It is Worth" and "Common Mistakes to Avoid When Selling a Business")
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How do you work with a client's attorney, accountant or other advisor(s)?
We strive to become one of your trusted advisors and work closely with your advisors in other capacities. In addition to presenting your company to the marketplace and obtaining multiple offers, we work with your accountants, attorneys and financial planners to structure the optimum transaction. Our professionals average over 25 years in business experience and most have owned and operated their own businesses. Our leadership coupled with our negotiation and deal structuring skills ensures that you have powerful representation.
(See also "Mistakes Your Clients Should Avoid in Selling Their Businesses")
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(Advisors) My client is interested in exploring the sale of a privately held company – what should we do and what should we be thinking about?
Key considerations when a client raises the possibility of a sale are timing and value. Is the timing right for your client, and is the company's future optimal and its strategic value highest? Clients consider selling their businesses for a variety of personal reasons, including boredom, retirement or other opportunity, or when an unsolicited offer comes their way. Unsolicited offers carry their own danger, as the question "I received an (unsolicited) offer for my company…" described previously.
(See also "Mistakes Your Clients Should Avoid in Selling Their Businesses" and "When the Time is Right, Consider Selling the Business")
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