Final Part- 11 Deal Making Lessons Learned By an Investment Banker
deal making Latin Business Today
During negotiations entrepreneurs need to have a plan and stick to it 

 

Part 3 of 3: leadership characteristics that can lead to great business success

Part 1 Lessons one to five here,  Part 2 Lessons six and seven here

I remind you that I began these series of articles after I was asked the question, “What makes a great deal maker?” In this article I address issues of basic business principles that are so often neglected in the heat of once in a lifetime transaction of selling a business or raising capital. Selling a business or raising capital is not dissimilar to a professional sports team arriving at their Superbowl, World Series or Championship game. To arrive at the big game, the owners, managers, coaches and players must have successfully executed, as a team, the fundamentals of their strategic plan over an entire season.

 

8.  Prioritize Objectives – ”Begin with the End in Mind” – Steven Covey

One of the tricky challenges for many business owners involves carefully considering all of their objectives.

As expected, most sellers focus on maximizing their selling price. But a fixation on a singular selling price can be costly if it is at the expense of considering other more qualitative objectives including:

1) protecting key employees (remember employment contracts)

2) maximizing after tax proceeds

3) composition of purchase price (debt, notes, earnout, rollover equity

4) reducing future liability (those reps, warrantees and escrows)

5) life after closing (retaining an equity ownership stake, earn-outs and non-competes)

6) protecting confidentiality during the process. To close a successful transaction, entrepreneurs need to balance a complex and often contradictory set of objectives. It is important to work with advisors to plan an executable strategy with clarity around your key priorities.

During negotiations remind yourself that you don’t need to win every negotiating issue, just the important ones.

 

 

9.  Practice & Planning – “Fortune favors the Prepared Mind”- Louis Pasteur

Be one step ahead of the purchaser. Companies don’t think twice about a year-long product roll out, while their preparation for raising capital is often done at one meeting with their management team.

Years ago we represented a selling company that was owned 50:50 by each of the two founders. One owner did some careful estate planning before the transaction and the other didn’t. The result was that upon the sale of the company, the planner got to keep almost twice the after tax proceeds than his unprepared partner.

Planning and preparation includes many key steps:

1) review your key contracts from a buyer’s perspective

2) review management and how they will present themselves

3) review your “special sauce” and determine if there are steps to enhance and protect

4) anticipate buyers’ concerns

5) identify barriers of entry for a potential buyer thinking about whether they can use their resources to build your business

6) review your systems and financials with your accountant or independent third party, asking about weaknesses.

Prepare, prepare, prepare: In deal making there is no substitute for preparation. Planning pays.  

 

 

RELATED POSTS

3 Tips To Keep People Engaged on Conference Calls

3 Tips To Keep People Engaged on Conference Calls

Time to change the "boring conference call", don't assume all conference calls have to be tedious and mundane. Conference calls are a way of life for most businesses. While convenient, they can be dreadfully boring and uninspiring.  Remember that all communication is...

Review is Critical to Small Business Success- 3 Recommendations

Review is Critical to Small Business Success- 3 Recommendations

Don't underestimate the critical process of review as it will align management to position your business for success.   Core to management and the success of any business is to establish benchmarks and map progress within predetermined periods of time. Here are...

Review is Critical to Small Business Success- 3 Recommendations

Review is Critical to Small Business Success- 3 Recommendations

Don't underestimate the critical process of review as it will align management to position your business for success. Core to management and the success of any business is to establish benchmarks and map progress within predetermined periods of time. Here are three...

Polls

Sign Up for the Latin Biz Today Newsletter

Video Gallery

PR Newswire

Featured Authors

Money

Talent/HR

Legal

Marketing

Strategy

Another Latina Small Business Recipe for Success

Another Latina Small Business Recipe for Success

Lilia Rojas Latina entrepreneur and owner of La Flor de Jalisco bakery has achieved success   Lilia Rojas takes an almost literal approach to running her business: the positive meaning of having her cake and eating it to. Perhaps that’s why her 14-year-old...

Fashion

Food

Music

Sports

Innovation

Work, Life & Culture

Culture

Health & Fitness

Travel & Destinations

Personal Blogs

Pin It on Pinterest