July 2024 – The Final Step

The Final Step in Preparing Your Company for a Successful Sale

The process of selling a company and finding the right acquisition partner is often one of the most important times in an owner’s life.
 
That’s why the fourth and final step in preparing your company to sell is an important one: Solidifying Your Team.
Previous newsletters covering the first 3 steps in preparing your company to sell can be found here.
We’ve broken this step down into three parts:

One: Strengthening Your Management Team

Two: Engaging Your Accountant and Attorney

Three: Communicating with Your Employees

Part One: Strengthening Your Management Team
Key man risk is one of the top considerations for most potential acquisition partners. They want to know that leadership and business development relationships won’t be lost post-acquisition.
| While easier said than done, having a reliable General Manager (GM) or #2 for the company who intimately knows the team, culture, and operations can alleviate many leadership concerns and ultimately increase the enterprise value of the company. Not to mention the positive impact that person can have on the performance of the business and the quality of the owner’s personal life.
 
| A potential acquisition partner will be reassured if they find that your production manager, reconstruction manager, office manager, marketing manager, and any other senior leaders in the company are aligned with the company’s vision, have industry experience, and tenure with the company.
 
| The same goes for business development and vendor relationships. If the owner controls many of the key relationships and revenue drivers, that comes with a lot of risk. That risk can ultimately hurt the value of the company.
 
+ The bottom line: if the owner is the single point of failure for any system or relationship, acquisition partners are going to want to see a system or key employee in place to mitigate that risk. As they say in the Army, two is one and one is none.
Part Two: Engaging Your Accountant and Attorney
| It’s no surprise that the due diligence process requires a substantial amount of data collection. Naturally, much of that data is financial data. While companies are structured differently, ranging from an in-house Chief Financial Officer (CFO) or bookkeeper to an outsourced fractional CFO or accountant, it’s important to have someone who can easily export financial data from your accounting software and help answer any nuanced questions that arise.
 
| This goes hand in hand with Step 2 in preparing a company to sell, where we talked about preparing the diligence materials and ensuring that the financials are clean so that the company presents well.
 
| Also, identifying and establishing a relationship with a seasoned business attorney well in advance will help ensure a smooth transaction process. This should be an attorney who has been part of many business transactions and can provide you with invaluable guidance during the acquisition. Having an established relationship and being comfortable with the person representing you from a legal perspective will provide peace of mind and help prevent delays in the process.
Part Three: Communicating with Your Employees
| How and what owners communicate to their employees during the due diligence and acquisition process varies. Some keep everything to themselves, others share openly with their leadership team. While this decision depends on team dynamics, having a team to help gather diligence materials and answer nuanced questions can significantly help lighten the load on the owner.
 
| Also, nobody like surprises. Over the years, we’ve seen that open communication and transparency create a positive environment post-transaction and allow key employees to feel like they are part of the process. This also helps build momentum leading into the partnership.
 
Involving certain employees in the process generally helps in a few ways:
  • Builds trust among key leaders that they know what is going on
  • Builds conviction for key leaders about the acquisition partner they feel confident will take the business to the next level
  • Builds conviction for the acquisition parnter that they know the key leaders and the caliber of the company’s team
 
| For technicians and front line, most employees just want to know that they will be taken care of, won’t lose their jobs, and the company won’t lose its culture. But for key employees, they will want to get to know the acquisition partner earlier in the process. This provides the owner a great opportunity to communicate the “why” behind the partnership and address any concerns. With the right acquisition partner, key team members will generally feel excited about what the future holds once they are brought in on the process.
Together, we turn Chaos into Calm.
Best, 
Griffin Brand, VP of Corporate Development
| What we look for...
 
+ Residential water mitigation focus
+ Independently owned
+ Strong leadership team
+ Growing, scalable business with a great local reputation 
+ EBITDA $1.25M+
All previous editions of the newsletter can be accessed here.
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