4 Common Mistakes First Time Sellers Can Avoid During the M&A Process
Do you intend to sell your business in the New Year? Selling a business is a big decision for any owner, and there are some things you should consider if this is your first time thinking about it. Volaris Net Europe has a wealth of M&A experience that it employs to best guide new businesses through the process due to our extensive experience in acquiring businesses. This blog will discuss five of the most common errors identified by our M&A professionals.
As a first-time seller, it is critical that you understand and plan around your primary motivations for selling your business. Are you selling because of diversification, expansion, or talent acquisition, for example? Setting your goals allows you to implement a specific plan/strategy that will allow your merger or acquisition to succeed.
“The biggest mistake I see from first-time sellers is to underestimate the time, emotional effort, and mental focus involved in selling a software business” – Nathan Godfrey, Portfolio Manager, Volaris Group.
We have designed the M&A process at Volaris Net Europe to be thorough, thoughtful, and detailed. We spend a significant amount of time during the M&A process on long-term business planning because we never sell a business we acquire.
Business owners should also make sure that they have plans in place to ensure that the sales process does not disrupt their ongoing operations. Planning is essential because it can reduce the impact of M&A processes on a company’s operations. It all comes down to knowing what you want to accomplish, what your end goals are, and what success looks like for you.
One of the most common errors that first-time sellers make during the M&A process comes with the valuation of their business. Often, they begin with flawed assumptions that fail to base a valuation in current markets and economic data along with an understanding of the competitive landscape. While a reliance on better data may push your valuation down, it will only help you better plan for the future and increase the chances of success.
Poor Due Diligence
Many M&A experts consider due diligence to be one of the most difficult steps in the selling process. Since the COVID-19 pandemic, there has been a lot more to think about and factor in than ever before.
When taking inventory of your business, it’s essential to be thorough and not unintentionally leave out information that could mislead a potential buyer. For instance, contracting out coding without realising you don’t have complete ownership of your intellectual property.
Rather than surprising the buyer with revelations throughout the sales process, thoroughly representing your company will help to build trust with the buyer.
Making A Good Start
Volaris buyers recognise that selling a business can be an emotional experience for both the owners and the employees. Our leaders have advised new sellers to contact colleagues who have successfully joined Volaris Net Europe and have gone through the process themselves. Here, they can have open discussions about the experience and find comfort in knowing that their purchases went well. It is important that your focus remains on the big picture despite the fact that the selling process can be drawn out and challenging.
“Through the sale process, your advisers will help you to see the various challenges and risks—that is their job. You should always take good advice, but give and take will be necessary at some point in any negotiation,” Godfrey advises.
“However, ultimately it is your business that is being sold. Your advisers cannot make these pragmatic decisions about your business for you, so you will need to do that. Sometimes this is easier said than done, but you need to consider what matters to you and which issues are material.”
As in life, it is beneficial to learn from past mistakes and commit to do things differently in the future. Our extensive experience has provided us with a comprehensive understanding of the dos and don’ts of the M&A process, and we hope to have provided some insightful considerations should you consider to sell your business.