How to Prepare Your Family Business for a Merger or Acquisition
If you’re hoping to sell a business owned by your family, you probably already know that your business is part money-making venture, part family member. So selling it means not only parting with the responsibilities it entails, but also with the memories it’s connected to.
If you’re hoping to sell a business owned by your family, you probably already know that your business is part money-making venture, part family member. So selling it means not only parting with the responsibilities it entails, but also with the memories it’s connected to. It’s common for participants in a family business to have wildly divergent opinions regarding exit planning, sales, sale price, and more. So preparing for a sale well ahead of time—ideally with the assistance of a skilled business broker who can navigate family and corporate politics—is mission critical. Here are some tips to ensure the most successful sale possible.
Consider Succession Options
If you own a family business, consider making succession planning a part of every discussion you have with stakeholders and board members. The earlier you can begin the succession planning process, the more effectively you can begin grooming potential heirs—or preparing them for the inevitable sale of the business.
Bring in Experts
Closely held family businesses often rely more on family politics than market conditions to make decisions. So the impulse when it’s time to sell the business is often to keep things in-house, carefully monitoring and managing the sale yourself. But running a merger or acquisition is a full-time job that demands significant expertise—especially if you do not want to be at a disadvantage when the buyer brings in their own panel of experts. Consult with a business broker early, and you’ll continue having time to run your business without the sale losing momentum.
Prepare for Due Diligence
Due diligence is a significant undertaking for any business. Family businesses are often especially hard hit, since they may run expenses through the company or otherwise engage in creative accounting. Your best bet is to prepare for due diligence well before it happens, so you know exactly what to expect and can promptly respond to any and all requests from the buyer.
Identify Your Ideal Buyer
Fetching the highest possible sale price with the best terms for your family and your business isn’t just about your business. It’s also about the buyer. Work with a business broker to identify the buyer profile who is most likely to see value in your company. Is it a competitor looking to add your company to their own? A PE firm hoping to grow it and sell it? Someone looking to own their own company by purchasing one that’s been well-run? There’s no right answer for every business. Instead, the key is to understand what makes your business attractive, and then identify the buyer who is most likely to see the value of these attractive attributes.
Ensure Everyone is Truly Ready
Parting with a family business is a lot like parting with a family heirloom—filled with emotion, and often, some family turmoil. It’s critical to ensure everyone with a stake in the business is ready to part with the company, lest they destroy the deal at the last moment. Encourage each family member to talk through their emotions and their deal goals well before a buyer signs a purchase agreement.