A very valid question that we’re asked at nearly every exit planning meeting we conduct is this:
Of course the answer to this is the age-old adage: It Depends!
Not to sound too crass, but the response is really true in this case. The successful sale of any privately held company depends on so many variables, and these variables can add time (or subtract time if planned for) that making a blanket statement to answer this question difficult. This is especially true during the time of economic challenge we are currently facing. Even though deals are still closing, because of uncertainty, due diligence is simply taking longer than normal, especially for those business owners that are unprepared for the questions buyers are asking right now, especially as they relate to EBITDAC!
However, having said that, we estimate, based on our collective decades of exit planning experience, it will take from 9-14 months and 1,000 hours of your time to exit your business using the professional M&A process like the one used by Generational Equity. Again, this time span will vary now because of our current economic uncertainty. But ASSUMING we begin to return to economic normalcy sooner rather than later, the age old issue that impacts the time equation (and this is true if you go alone or if you hire an advisor) is this:
One of the reasons professional buyers like working with Generational Equity is that they know our clients are true sellers. They are not in the market, “kicking the tires” just to see what offers they might get.
A quasi-seller using this approach is a colossal waste of time for buyers looking at the deal. Most have a limited amount of time to spare looking at each possible transaction that comes their way. Spending 3-6 months pursuing a seller, especially if due diligence is started, only to have the seller back out, is a disaster.
You Are A Seller!
But let’s assume that you are truly a dedicated seller so we can get over that time hurdle. Other time-consuming parts of the process that you will most likely have to farm out to various professionals include (again, assuming you are moving forward without hiring an M&A advisory firm):
Each of these is a skill set unto itself. Unless you have sold a business or two on your own already, or if you are a true renaissance man (CPA, research guru, experienced sell-side deal negotiator), you will need to hire three separate teams to guide you through these steps. This will, of course, add time to your exit window.
First, while successfully running your company, you will need to research and hire an experienced CPA who has done financial recasting for M&A processes before. This is usually NOT the accountant that does your taxes every year. Recasting is an art and a science and requires experience to ferret out every possible recasting item to your benefit. To learn more about recasting, read our post on this topic:
Secondly, you will need to find a business research professional that has experience in creating buyer lists that are both targeted and broad (a difficult proposition indeed). In addition, this person will need access to all of the research tools available that are used by M&A analysts who create buyer list. This is very important. Make sure this person, especially if they are affiliated with your industry association, is simply not using the same list over and over again for every engagement.
Finally, you will need to hire an experienced M&A attorney who can protect your interests during the vital deal negotiation process. It is critical that this person be an M&A-focused attorney. Although non-M&A attorneys can be used, they often have a steep learning curve when it comes to the intricacies of closing deals.
Of course if you don’t have the time to research and interview candidates for each of these (and we suggest that you get at least three detailed quotes for each), you can save some time and money in the short term by:
These will save you time and money in the short term, but could end up costing you millions in a failed transaction, when hiring a professional team can handle it all for you. This again, is especially true in today's economic environment.
If I Could Save Time in a Bottle…
And one time-related issue we have not discussed yet which is probably the most paramount is that, while doing all these steps effectively, you must also continue to manage the company so that the business is on track when you are negotiating with buyers.
And here is a really important point we have to make about time: The sooner you start the exit journey the better. Certainly today's daily news is upsetting and is causing many business owners to pause their exit plans. However, since it takes 90-120 days to simply do the initial phase of the process (which should include a full evaluation of the business including the COVID-19 recasting mentioned above) starting your journey today may in fact put you in the market at the same time our economy is entering full recovery after the pandemic is winding down. Now we cannot predict the future; however, if the experts are correct and sometime in mid-summer the economy fully re-opens in most areas of the country, starting your process sooner rather than later could be a great idea.
We have never met a business owner who regretted starting to prepare for his/her exit too soon!
For better odds of success (and to retain your sanity/avoid marital and familial strife), we recommend that you hire an M&A advisory team to guide you through this journey. Fortunately for you, the leading exit planning firm for middle market business owners is here to help. We have taken Wall Street financial processes and successfully applied them to Main Street businesses for years. Our track record speaks for itself:
The real answer to your question about time and selling is this: The length of time it takes is directly related to how prepared you are at every hurdle in the process. If you are going too piecemeal it by hoping to save money and use subcontractors at every step, it will end up taking you longer. As Kurt Vonnegut so aptly described it, “In this world, you get what you pay for.”
If you want top-flight exit planning advice, and the benefits they accrue, give us a call! This is especially true now in the uncertain economic times we find ourselves in. Now, more than ever before, having sound, professional exit planning guidance is vital to your success.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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