Timing is one of the most important factors in achieving a successful company sale or divestiture. So how do you know when the ‘best’ time to sell occurs?
Sell a Company When it is Performing Well and the Future is Promising
There are five primary factors to consider as you are thinking about timing the sale of a business. Rarely do all these factors peak simultaneously, so judging them on a relative basis is important.
- Macroeconomic Conditions: A stable or growing gross domestic product, relatively low inflation and low interest rates provide fundamental support to a healthy economy, confidence and deal making.
- Industry Trends: Positive underlying trends, such as a strong growth cycle, related to your company’s industry often correlate with heightened levels of acquisition activity and higher purchase prices.
- Company Performance: Companies with successful historical track record of earnings, unique competitive advantages, growth prospects and solid management will generate the most interest from buyers.
- Capital Flows: When there is an abundance of capital from strategic buyers and financial investors competing for deals, the market becomes very liquid, which fuels transaction activity and higher valuations.
- Merger & Acquisition Activity: An active merger and acquisition market is the manifestation of the interworking of all these factors and signals that deals are being completed at compelling prices.
Other Points to Note Regarding Selling a Business
Sell a company before company performance declines. Buyers generally pay based on most recent financial performance. So, if company performance has recently declined, you should not anticipate buyers paying based on some level of past average earnings achieved.
Sell before health, personal upheaval, burnout or inability to fund growth limits your options and prevents you from selling on your own terms.
The typical company sale is a complex and lengthy process, taking six to nine months, or longer. If your business suffers because you are trying to manage your business and sell your business simultaneously it may cost you your time and your money. A Mergers & Acquisitions Advisor can manage the process allowing you to focus on your business.
You should also rely on your Mergers & Acquisitions advisor to provide insightful information regarding market trends, assist in determining business readiness and facilitate a competitive process that provides you leverage to achieve the highest price.
There is an old expression that applies to timing:
Business owners seldom sell too soon, but they often wait too long.
