Many business owners do not take into account the role that timing plays in completing a transaction when selling a company. There are two components of timing: When the business is exposed to the market and being able to react in a timely manner.
When the business is exposed to the market – I have previously indicated, that if I were advising a client relative to the best time to put a business on the market, I would indicate that I would want to put the business on the market at the end of November or the beginning of December. The reason for this is that even though the business is unlikely to sell before the end of the year, a lot of buyers have discretionary time over the holidays. That’s valuable time they invest researching and actively pursuing an acquisition for the beginning of the new year. Do not underestimate the momentum of pursuing New Year’s resolutions, such as working out, moving into a different place, or buying a business. By being on the market, the business has a greater probability of being noticed. This strategy is complimented by having your accountant on notice to complete your year-end financials and tax returns as soon as practical.
Being able to react in a timely manner – There is an often-used expression in the M&A community that “time kills deals.” There is a lot of stress for both the buyer and seller in completing a business transfer. When things drag out, deal fatigue comes into play and the probability of completing a transaction diminishes. On the Sell side, the Seller and its advisors should anticipate what the Buyer and his advisors will want to review and have that information available. This is one of situations where an experienced intermediary can add value to the process. The goal is to anticipate the next several moves in the chess game and have a plan that is ready to be implemented.
Buyers should have written acquisition criteria in and have assembled a team of advisors, including a transaction attorney and an accounting firm, to assist with due diligence and tax planning. Additionally, having a probable lender identified and understanding the lender’s structure, rates, and costs.