Preparing a company for a sales process provides multiple benefits: it makes the company more attractive, it enhances the sellers’ negotiation power and, when profit and processes have been improved, it raises the fair value.

By Eugenio Micheletti* for staffingamericalatina

In June’s newsletter we mentioned how important it is to distinguish those cases in which the decision to sell was foresaw and planed, from those cases in which the sale is an unavoidable necessity. Even though it is always possible to prepare a company for a sale process, when the shareholders have the necessity to sell, there is a limited period of time to develop an action plan in order to facilitate and improve results.

Necessary Conditions:

As it happens with every resolution that compromises the financial situation of the enterprise, the decision of selling the firm demands the support of its’ key members process. This means that the majority of shareholders, board members and senior management must commit with the action plans developed and act accordingly to an appropriate corporate governance. Without the executive members’ political support, every action is doomed to failure.

Action Plan:

In order to achieve a more attractive position for the investor, we set the following steps:

–          To state the company’s maturity and set goals for the next period: It is important to explain how mature the company is as regards business processes (strategic, commercial, financial, operations and services).  From that point on, we may define in which way we must direct our efforts.

–          Process improvement: to implement changes that improve results in each process, focusing on costs optimization and costumer care. We recommend using external advisor’s support to achieve better results at an early stage.

–          To develop and/or enhance the company’s planning process: medium term strategic plan, annual budget, measurements, managerial control, goals definition, performance evaluation, and others.

–          To assess those risk to which the company is exposed and take actions to manage them. This function is aimed to reduce the likelihood of events that affect the business profit from happening, as well as to minimize the financial impact, strengthening the sustainability of the business.

–          To optimize the internal control system over the company’s processes, particularly those that impact financial reports. This shall reassure potential buyers, as contingencies would be at an acceptable level.

–          To establish communications with key contacts of the sector so that potential buyers become aware of the purchase alternative, as well as to gather buyers and sellers with similar interests. There are commercial chambers, M&A specialised consultants, direct contact with companies whose expansion strategy through acquisitions is well known in the market, or other alternatives to find a suitable and reliable partner or investor.  Needless to say, every exchange of information must be done under confidentiality agreements that safeguard the interests of all parties concerned.

–          To define the future roles of board members and senior management in the case of purchase (partial or total), attending to everyone’s expectations and needs, up to the extent permitted by the company’s public interests.

–          To propose viable alternatives within the Board of Directors in case potential interested buyers appear, and always look for the best option for both parties (sellers and buyers).

These tasks demand a deep knowledge of the sector, the market in which the company operates, and the key contacts for potential buyers, as well as a high specialization in M&A processes. All these aspects have an impact on the achievement of deals that shall benefit every party involved.

*Eugenio Micheletti is Director of Emerging Staffing Brokers

emicheletti@emergingsb.com