M&A involving privately held businesses involve numerous legal, business, HR, IP, accounting, and other issues. Successful navigation of your sale demands an understanding of common dynamics and issues. Here are 12 key points to bear in mind as you move through the M&A process.

  • Valuation is negotiable. If you can show why the value should be higher or structure the deal in a more favorable way, you can exit with more cash in hand.
  • Sales almost always take longer than you expect. Marketing, negotiating, and closing the deal usually takes at least 4-6 months. It can take longer if you are not well prepared for the deal or if negotiations fall apart at any point. Hiring an intermediary such as an M&A advisor to handle the deal can help.
  • The buyer will want to engage in significant due diligence. Don’t expect the buyer to take you at your word. They will want to see documentation of every claim you make. That’s what due diligence is for, so be prepared with paperwork to back up any and all claims.
  • The buyer will thoroughly vet financial statements and projections. Buyers know that it is in your best interests to build a rosy forecast for your business. Be prepared to back up your predictions with hard evidence and specific details about the formulas you used.
  • A competitive bidding process can help you get the best deal. The more bidders you have interested in the sale, the more competitive the process becomes.
  • You need an exceptional deal team. Don’t just rely on in-house counsel or the first accountant referral you get. You need an expert M&A lawyer and a knowledgeable M&A advisor.
  • Consider hiring an expert advisor. In many cases, an investment banker or other M&A advisor brings significant value to the transaction. They can manage the ongoing demands of the transaction while you manage the business, while also advising you to keep your expectations reasonable and the deal moving forward.
  • Intellectual property matters. The buyer is going to want to know what IP you have available and how easily ownership can be transferred. You’ll need to gather all relevant documents and ensure that the IP transfers along with the business.
  • Don’t let the letter of intent be a barrier to the sale. Buyers often want a non-binding letter of intent. But the LOI is critical to setting the tone of the sale and managing basic assumptions. So spend some time negotiating this letter so that it does not sideline the sale before it even gets going.
  • Understand the importance of the acquisition agreement. A well-drafted acquisition agreement protects you and the company. Have your legal team, not the buyer’s, prepare this document. And never blindly accept a document prepared by the buyer.
  • Be mindful of the role of employee and benefits information. The buyer will need your team to support integration and shepherd the acquisition to success. So consider the role of your employees, and find ways to incentivize them to stay.
  • Know how negotiations work. You must understand who has leverage at each stage—who wants the transaction more?–and use that to your advantage. This is one area where a wise M&A advisor can be particularly helpful because they understand the ins and outs of the deal negotiation process.