If you have built your business up to a decent level and are now weighing up your potential options, it can be a real challenge to decide which route to take to achieve the best possible outcome.
Negotiations can often be complex, and it might also be difficult to get a clear idea of whether the offer to buyers is the right price you should be happy to accept.
Another key question is whether it would be more advantageous to sell outright or if considering the idea of a merger might be the right line of thinking.
Here is a look at the various aspects of selling your business and what to expect with a merger so that you may be able to make a more informed decision.
You may have to be patient.
Whether you are selling a business or negotiating a potential merger, the common theme amongst both options is that it will take a reasonable amount of time to get the deal over the finishing line.
It is not unusual to see a transaction of this nature take anything between four and six months to complete, and sometimes it can be an even longer process.
That is a long period of time where you may have to focus plenty of your energy on answering a raft of different financial and technical questions as part of the standard due diligence process.
If you anticipate this sort of timeframe and prepare in advance as best you can by putting together a set of facts and figures that you know will be needed by the interested parties, this could help reduce the time it takes to close the deal.
Are you looking to grow your business or sell it?
Knowing the answer to this particular question will help decide which way you go between a sale and a merger and acquisition.
If you are looking to increase your business’s value and believe that there is still plenty of growth potential, the preferred route to fulfill that potential is most likely to be a merger like Andrew Barnett.
If you manage to find the right partner to work with, it is possible that merging could have the effect of making your company more valuable in the longer term.
A successful merger’s positive impact is that it likely creates an increased level of turnover, keeps job losses to a minimum, and reduces your overheads.
As a result of these potential positives, it can make your business more attractive as a lending proposition and should also enhance the value of any equity you hold in the company. If you are interested in knowing more about mergers and acquisitions in general, this Wall Streep Prep guide should be your first stop.
Tapping into new talent
Another point to consider when looking at the merger options is that it can create an excellent opportunity to access a talent pool that was not available to your beforehand.
You could find that your business enjoys a further boost in its fortunes due to teaming up with people who bring a new or different level of technical ability to the table and creating a new business partnership that thrives.
This newly found synergy achieved through merging could result in you achieving an even greater return on your stakeholding at some point in the future.
The right time
It often pays to remember that you can often have value in your business, but the only way to turn that value into cash is by selling up.
While taking the merger and acquisition route is all about building the business and adding future value by selling, the company will achieve liquidity.
Timing is such a crucial element in a business’s lifespan, and if you hold on to your business for too long, it could see the value of your company decline, and there is always the risk of failure at some point in the future.
If things take a turn for the worse and you find that your business’s fortunes decline for any number of reasons, you will then be wishing that you had sold when you had the chance to do so.
There is often a peak point in a business’s normal life cycle when it is at its most valuable. If you think that point is now, it might be prudent to take that offer and cash out.
Your risk profile might have changed.
It is quite likely that when you first started your business, you were pretty fearless with your decision-making and prepared to take more risks than you might now.
When a business is just starting out, it doesn’t have much value at that point, so its owner will possibly think they have nothing to lose by taking some risks to achieve growth.
What tends to happen over time is that as your business becomes more established and adds value to it, you might become a bit more conservative in your approach as a defensive mechanism for protecting what you have achieved and accumulated to this point.
If you have grown tired of taking risks, it might be the right time to consider a sale.
Related: Everything You Need to Know About Financial Risk
The need for working capital
Another key factor that could influence your decision to sell or seek a merger is when you are struggling to maintain the right amount of capital in your business, which could threaten its survival at some point.
It is fair to say that if you don’t have adequate funding for your business, it will be an uphill task to truly achieve the full potential that your company appears to offer.
If you feel that the business needs greater liquidity, this could be the pivotal moment when you either sell your business or seek out a way of injecting some more cash and life into your business by exploring the prospect of a merger and acquisition.
Certain factors should always come into play when considering whether it would be better to sell or go for a merger. Analyze all your options and see which route is the most advantageous for achieving maximum value for the business you have worked so hard to build.
