My experience in logistics industry acquisitions has included both buy and sell side valuation, negotiation, documentation and integration (Please see “Representative Cases Page”). During my tenure as EVP Strategic Development and General Counsel for GST Corporation and NYK Logistics (Americas) my acquisition team accounted for more than $450M in accretive growth, for which I had primary responsibility from target identification through successful integration.
From these experiences I have learned a few “musts” for fulfilling the expectation of a successful deal. The following is a brief discussion of some of these musts from the perspective of a seller:
- Alignment of Purpose: Well before you signal to either strategic or financial buyers that you want to sell your business, be sure all senior management is aligned as to exactly why you want to sell. A motivated buyer will be less interested in an organization for which there is any disagreement or ambiguity as to this purpose.
- Audited Financials: If you do not already have audited (or at least reviewed) financials, invest in this process. This should also be done well before your first conversation with a potential buyer. Such well prepared financials will provide at least the following:
- The interactive process of reviewing accounting practices and rationalizing any questionable entries, before you cannot explain them satisfactorily to a buyer.
- Information gained from “clean” financials that accurately reflect the current profitability can be used to begin improvements in sales and operations.
- Having reliable financials can help you and your team realistically value the business and prepare you for what appear to be weaknesses before you are in negotiations.
- Prepare at least 2 yrs prior and current YTD financials with a minimum of income statement, balance sheet and cash flow statement.
- All senior management members who will participate in negotiations should know all important ratios of revenue to cost of sales, expenses, gross margin and, of course EBIT and EBITDA.
- Business Plan: Buyers want to know that you are not running your company by the seat of your pants. Even if you have not heretofore done so, prepare a business/strategic plan which demonstrates solid knowledge of your customer base, revenue segments and action plans for continued growth.
- Contingency Management: Never wait until you are in a LOI and/or post purchase agreement to clear up contingencies such as litigation, lease term, customer turnover or market uncertainty as it relates to your market share. These are prime areas where buyers may begin diminishing the ostensible purchase price, perhaps unnecessarily.
- Physical and Digital Document Room: A well organized document repository avoids confusion and continues to impress the buyer with your company culture. It also serves the purpose of keeping all members of your sell team well advised and current on all facts that will be presented. Such a facility should be initiated well before due diligence.
- Sell Team: As a buyer, I have many times been surprised that an otherwise sophisticated company had so little competent assistance in attempting to complete the sale of their company. While cost should be managed, at a minimum early involvement of qualified financial/accounting and legal allows your deal to have equal footing with the buyer. These resources, if experienced, can often provide many more times value than cost.
- Limit Time Committed to a Buyer: An extensive or open ended “exclusive look” or due diligence period can diminish the value of your company in many ways. Morale, performance and customer stability are a function of getting a deal done quickly or rescinded. I always promised a seller to close within 60 days of a well drafted LOI, or agree to mutual release or extension of the deal. Beyond that time the value of your company is potentially suffering for lack of mutual commitment to getting the deal done or incompetence of the buyer/seller teams.