Challenges for SME’s

Unexpected Offer to Sell My Company | Negotiated or Targeted Sale

Many business owners are confronted with an unexpected opportunity to sell their business… let’s call these “unsolicited offers”. Frequently, they haven’t really thought about a succession or exit plan nor have they prepared for a deal if they so desired. Sometimes these are called negotiated, one-off or targeted transactions.

Typical questions that we field in these discussions include:

  • How do I control the competitive risks of engaging with them?
  • How do I know that what they are offering is the best deal for me?
  • How much is my business really worth?
  • If I want to respond, what information should I share?
  • Is the timing right to sell my company?
  • Should I negotiate only with this potential buyer or should I try to bring other buyers to the table to create competition?
  • Who on my team should the buyer be talking with?

An error is focusing exclusively on valuation, missing the forest for the trees. Evaluating an offer (unsolicited or otherwise) is about a combination of – – valuation AND deal structure AND timing!

RLP is experienced in evaluating and responding to unsolicited offers, using our proprietary technique to simulate a competitive process while discretely optimizing the transaction outcome for our clients.

Many business owners are confronted with an unexpected opportunity to sell their business… let’s call these “unsolicited offers”. Frequently, they haven’t really thought about a succession or exit plan, nor have they prepared for a deal if they so desired. Sometimes these are called negotiated or one-off transactions.

 

Fantastic Time to be Selling Your Business

The times to be selling or buying a business are excellent. We are in an unprecedented time with all-time low interest rates and the lowest cost of capital environment in history to finance and operate a business of any kind.

SMEs are trailing the larger corporates in upgrading in technology and going digital, but, that trend is unavoidable and going to accelerate and make SME’s increasingly more transparent and easier to operate and to evaluate.

There are over 420 million SMEs in the world, most of them are in the immediate need to upgrade, restructure, refinance, and to become more transparent and compliant from a regulatory evolutionary standpoint, as there is one major headwind, namely government and local regulators globally are increasing compliance and documentation thereof more stringent and making it challenging to run a business accordingly.

The M&A market is changing daily, and many factors are affecting deals in 2021. While we do not have a crystal ball, it is evident that there are a number of themes in global capital markets that may suggest that if you are considering selling your company in 2021 and beyond, then now is the time.

The credit markets are changing daily. We are seeing lenders backing away from term sheets based on their bank’s industry exposure, small discrepancies that emerge during due diligence, and more conservative underwriting. There is talk within the market that lenders may continue to tighten their lending standards making it harder to obtain credit for acquisition. This may have a direct effect on multiples.

While we know that the tax environment is today, we can only anticipate that long term, taxes will increase. With the various US federal initiatives related to COVID-19 and the economic decline, we suspect that the US will have to raise taxes to overcome the growing debt burden that has been created in 2020.

All these factors contribute to the M&A market, valuations, and deal structures. The best time to sell is now.

 

Management Buyout

Navigating the purchase of the company that you’re working for can be a tricky process; you endup with conflicting loyalties and some awkward conversations. We are experienced in guiding management through the steps, strategy and discussions to evaluate, finance and negotiate a management buyout (“MBO”).

 

Succession / Transition Planning

All businesses eventually change owners, whether planned or not. Succession planning incorporates the ambitions of the owners, the industry cycle, the business cycle, and the relative strength of your company. In most cases, it takes time and a lot of reflection to arrive at a succession or transition plan that aligns with your desired legacy, that’s tax efficient and that fits your long-term portfolio strategy. We bring a capital markets and corporate finance perspective to the conversation in conjunction with your personal financial and wealth planning team.

 

Preparing for the Sale of My Company

Our clients often seek to optimize their corporate performance and become transaction ready. A great way to gain insight and to catalyze the thought process is to complete our Value Levers Assessment, which is part of our overall method of Enterprise Value Engineering™. As patient advisors, we take a long-term perspective in helping our clients achieve their goals and ambitions. The good news is that the activities you undertake to prepare for a transaction are largely the same as those for improving company performance and value, even if you decide not to sell. Understanding the state of your business is good way get started.

 

Our Business Plans Include Historical and Projected Financial Statements

Investing institutions must believe that the Company’s business plan is both strategic and attainable. To illustrate to investors the viability of the Company’s capacity to grow, the business plan must include historical and projected financials. Business plans not only need to tell the story of the company, but need to accurately reflect the current and future financial performance of the company as well as the expected results with the desired financing.

Red Lion Partners writes comprehensive business plans for established businesses that contain a prioritized growth strategy. As corporate financial planning consultants and qualified business advisors, we ensure that the plans we write for our clients are attainable, and the capital requirement is realistic. We analyze the many methods available in the capital markets to help finance the growth of the business. We help management determine the financing option that best positions the company for the future prior to distributing the business plan to qualified institutions.

Red Lion Partners business plan development process includes working with entrepreneurs and management teams in order to develop and define all aspects of a company’s business planning strategy, including marketing strategy, growth strategy, acquisition strategy, and capital raising strategy. Our plans are reflective of a solid performing company that has experience raising capital from institutions and investors.

Red Lion Partners writes business plans with financial models and get them funded from institutional lenders, equity firms, and specialty debt providers. By developing the plan in conjunction with our dynamic financial planning process, Red Lion Partners ensure that the business plan is relevant to the current market demand before distribution to investors or institutions.

Our business plan development process does not require that we “start from scratch”. We are very happy to use the information that a company has previously developed and can ensure that the final plan is written professionally, and contains the appropriate financial information that reflects the professional standard expected from institutions and investors.

Written by experienced advisors our typical business plan writing and dynamic financial planning process takes two to four weeks to complete prior to sending out to institutions. Based on the financing required, clients can expect funding in three to six months post project kick off from qualified institutions interested in receiving their business plans, and qualified to fund their need.

Red Lion Partners has relationships and primarily targets financial institutions that know our work, solicit our plans, and are interested in investing in specific market sectors. This ensures that our business plans are welcomed and read by a wide range of financial institutions. In short, institutions are anxious to hear from us and invest in our clients.

Unlike mass business plan writing companies, Red Lion Partners pre-qualifies investors and banking institutions before sending out business plans. We don’t typically represent startup companies. We write business plans for companies that require financing to fund growth, acquire companies, execute management buyouts, leveraged buyouts, or refinance corporate debt.