The COVID-19 pandemic has affected many businesses, including those in the manufacturing sector.
This has led to supply chain challenges, closed businesses and displaced employees, not to mention the huge personal impact on employees and their loved ones, many of whom have paid the ultimate sacrifice with their lives.
The pandemic caused many workers to evaluate their work situations, leading to the Great Resignation as workers left their jobs.
While it’s not the Great Resignation per se, the pandemic and various business challenges are also causing business owners, especially aging baby boomers, to ask what’s next for their businesses.
Is it time to consider selling the business and retiring to a tropical island (or just spending more time golfing or playing with the grandkids)?
With trillions of dollars in private equity dry powder in the market, continued uncertainty about the impact of the pandemic, and the benefits you can gain from business consolidations, it might be a good time to consider the next phase for your business.
Market disruptions can provide favorable opportunities for business combinations, turning very challenging times into win-win situations for all involved.
Tips for success
If you are considering selling your business to take advantage of these opportunities, here are 10 tips to consider.
1. Plan ahead. don’t wait Make sure your business records are in order and up to date well before you plan to sell. A well-organized business with a tidy house makes a good impression on buyers and will make the selling process easier.
2. Hire an investment banker. Even before you consider selling your business, it’s helpful to connect with an investment banker who knows your industry.
An experienced investment banker can help you position your business for sale, help you value your business to maximize your return, and help with the sale process itself.
Investment bankers tend to focus on specific industries, so make sure you choose one with manufacturing business experience in your industry sector.
Browse and interview several so you hire one who shares your sensibilities and has the necessary experience and demonstrated success in identifying buyers and closing deals.
3. Surround yourself with competent advisors. Having a good accounting firm and legal counsel can be invaluable in preparing your business for sale and assisting with the sale.
The sales process has many aspects that happen in parallel. The buyer’s due diligence process will review financial matters, corporate governance, ownership, contracts, labor matters, employee benefits, real estate and environmental matters, among others.
Having accountants and lawyers who understand your business and can help facilitate the due diligence process, deal with any issues that come up, use their experience to know what things to sweat and what constitutes more few worries, and in the end to document the transaction, will put you in good exchange for a smooth process and the desired result. It takes a village.
4. Consider the tax implications. Use your advisers to help you assess the most tax efficient way to sell your business.
There are only a few ways to sell a business – sale of assets, sale of shares, merger and in some countries stock exchange. Each method of sale comes with different tax implications that will affect the final amounts collected by the business owners.
Asset sales can have a two-tier tax, with a tax at the enterprise level followed by a tax on the owners when distributing the net proceeds of the sale.
Other forms of sales transactions may have only one level of tax per owner level.
5. Do a financial statement audit. Although not every company has audited financial statements, audited financial statements help buyers evaluate your company by providing the auditor’s assessment of your company’s financial condition.
Having a reputable auditing firm gives your company credibility and speeds up the review and assessment of the company’s financial position.
6. Sign the NDA. Before sharing your company information with others, make sure that the parties have signed a non-disclosure agreement for information exchanged in confidence.
A company’s proprietary information and trade secrets are a valuable asset, and every business should take care to protect that information.
Businesses should take special care when dealing with competitors as potential buyers and may find it advisable to share information in waves, so that their most sensitive information is shared only when it becomes clear that a deal with that buyer is likely. buyer.
7. Come up with solutions. Every business will have its own problems and challenges to deal with. You may have a thorny lawsuit pending or an environmental hazard on your property.
Don’t bury your head in the sand. Know how you intend to handle challenging situations to minimize the impact on the buyer.
8. Advocate for your employees. If the plan is to have your employees involved in the deal, make sure they are treated well to ensure the sale is successful.
In many deals, the sales force is key to the success of the business. Mapping employee benefits from the seller to the buyer so that employees have at least the same benefits they are used to will help ease the employee anxiety that is a natural part of change.
9. Don’t forget to look close to home. Think of the next generation of family members and current employees as buyers of the business. No one may know the business better than them and may have the desire to take the business to the next level.
10. Have faith. The sales process can take a long time and have many twists and turns, ups and downs. Be reasonable, patient, responsive and flexible. If it’s meant to be, it will happen.
About the author: Donna Brooks is a partner in Shipman & Goodwin LLP business and finance practice where she advises on business organization, business operations and contracting, corporate governance, asset and endowment management, finance, capital raising, securities offerings, equity compensation, joint ventures and mergers and acquisitions.
For more information on Shipman’s Manufacturing Practiceplease contact Alfredo Fernandez (860.251.5353; [email protected]).