According to Victor Basta, CEO and founder of investment bank DAI Magister, businesses should begin preparing for a potential sale up to two years in advance. CEO’s main job should be to ensure a successful exit, and by prioritizing this focus in the months or years leading up to a competitive M&A sale process, businesses can increase the price and certainty of a deal. Basta recommends making exit preparation a business process over a designated period, with a small group assigned for clear oversight and responsibility allocated, goals set, and outcomes evaluated. Additionally, adding someone to the CEO’s circle with experience in successful exits can help navigate the process with confidence.
Strategic buyers are more interested in what they can do with the acquired company post-close rather than the company’s current numbers, claims Basta. One of the biggest mistakes CEOs make in exit planning is focusing on refining forecasts in the manner of a funding round, instead of ensuring that the company exceeds its near-term forecast by even a small margin. CEOs often undervalue risk reduction, while strategics focus on both risks and potential for upside. To successfully attract buyers, a sale memorandum must tell a compelling story that anchors a company’s accomplishments and demonstrates its potential for growth.
To ensure the correct strategy is in place, groups must be assigned for exit preparation. CEOs must invest time into achieving a successful exit by conducting regular reviews with clear deliverables, ensuring management and the board see how exit prep has developed every two to four weeks. Lastly, sale memorandums must tell a compelling story by defining how the company stands out from competitors, communicating opportunities, and highlighting the company’s core DNA. In conclusion, preparation is crucial for a successful sale process, and the earlier businesses begin the process, the better.
