Selling a business can represent one of the most important and life-changing decisions that you will ever make. Whether you are about to reach the age of retirement or you are hoping to join forces with a similar organisation, there are many factors that should be addressed. One of the most important variables to understand is how mergers and acquisitions function. While you have likely already heard of these terms, they are a bit more complicated than they may initially appear. Let’s look at the differences between these two possibilities before examining a few suggestions to keep in mind during the sales process itself.
Mergers and Acquisitions: What Are the Differences?
Mergers and acquisitions are often used interchangeably within the same sentence. However, each is associated with slightly different actions:
- Mergers occur when two businesses agree to form a single company.
- Acquisitions take place when one organisation decides to purchase (acquire) another for an agreed-upon price.
Of course, these are rather simplistic definitions. They nonetheless help us to understand the disparities between the two. What else should you be aware of before the sales process begins?
The Initial Steps When Selling a Business
Assuming that you are looking to sell your business to a third party, you will first need to examine any companies which may match the profile that you are looking for. Factors to keep in mind are how their management team functions, their previous track record, the available funds and how much they are willing to pay for the acquisition. This can be complicated and time consuming, so it is often wise to hire a professional adviser. He or she will be able to identify the most important metrics and present them to you in an easy-to-digest manner.
If you have found a few noteworthy firms, you will next “pitch” them your organisation and provide potential buyers with detailed information. These variables will often include working capital, any outstanding debts, previous sales history and product development figures. The buyers will thereafter perform their own due diligence before offering any type of proposal. It is normally during this time that you will create a non-disclosure agreement (NDA). This document legally prevents any confidential information and/or intellectual property rights from being shared with other third-party entities. Once again, it is a good idea to speak with a professional wealth manager or business adviser in order to determine the exact stipulations that should be included within this document.
One Step at a Time
Always remember that selling your business can represent a time-consuming venture. It is nonetheless a fact that the end results are well worth the effort. If you would like to learn more about the mechanics behind mergers and acquisitions, please visit https://www.bcms.com/gb/en-gb/mergers-and-acquisitions. Whether you own a start-up business or the firm has existed for decades, the fact of the matter is that the sales process always needs to be understood in order to reap the long-term benefits.