Recent M&A studies show earn-outs appear in roughly 22 to 33 percent of private-company deals. The median performance period is twenty-four months, and the median earn-out represents about 43 percent of the total purchase price. Here is how to structure them so they work for you.

Subscribe now

Choose the Right Metric

Revenue is easier to measure and harder for a buyer to manipulate, which is why it now appears in about 62 percent of earn-outs. EBITDA metrics reward profitability but can be gamed through accounting choices. Pick the metric that best reflects what you control today.

Set Clear Definitions and Timelines

Define every term in plain English: what counts as revenue, how expenses are allocated, and what happens if the buyer changes the business model. Shorten the earn-out period to twelve or twenty-four months whenever possible. Longer periods increase uncertainty and buyer resistance.

Negotiate Buyer Obligations

Include a covenant that the buyer must operate the business in good faith and cannot take actions designed to reduce your earn-out. Require quarterly reports and an independent accountant to resolve disputes. These protections turn a vague promise into enforceable terms.

Limit the Downside

Cap your exposure by negotiating a floor on the base purchase price and making sure the earn-out is additional, not a replacement. Many owners also negotiate accelerated payment if the buyer sells the company again during the earn-out window.

Use Them Sparingly

Earn-outs work best when there is genuine disagreement about future growth. If the gap is small, a higher base price with a modest seller note often creates less friction. The goal is to get paid for the value you created without turning the next two years into a legal battle.

When structured thoughtfully, earn-outs become a tool that aligns interests instead of dividing them. They let you sell today at a fair price while still participating in tomorrow’s success.

I sit down with owners every week to map out exactly which structure makes the most sense for their situation. There is no charge for that first conversation. Reach out if you would like to talk through where your company stands today. Protecting your upside does not have to come at the cost of a clean close.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality

Recent reports show well-organized virtual data rooms can shorten due-diligence cycles by days or even weeks, with some deals closing a full twelve days faster. Here is exactly how to build one that works in your favor.

Subscribe now

Start Twelve to Eighteen Months Early

Do not wait for the first buyer call. Begin collecting documents now while you are still running the business. Create folders for financials, legal, operations, customers, employees, and intellectual property. The best rooms follow a standard M&A index so buyers know where to look.

Organize for Speed and Search

Use a professional virtual data room platform with full-text search, version control, and permission settings. Group documents logically: three years of audited financials first, then tax returns, contracts, customer lists, and employee agreements. Index every file so a buyer can type “customer concentration” and find the answer instantly.

Remove Friction and Red Flags

Redact personal information before uploading. Provide clean, normalized financials instead of raw QuickBooks exports. Include a separate “Q&A” folder for questions that come up during diligence. Buyers who find answers quickly stay excited and keep competing.

Control Access and Track Activity

Grant access in stages. Give financial buyers basic information first, then open more sensitive folders once you have a serious letter of intent. Most platforms show you exactly who is looking at what and how long they spend. That intelligence helps you anticipate their concerns.

Keep It Updated

Set a weekly routine to refresh numbers and add new contracts. Nothing kills momentum faster than a buyer pointing out outdated information. A living, breathing data room shows you run a tight ship.

A strong data room does more than save time. It removes doubt and lets buyers focus on the upside of your company instead of hunting for problems. The owners who treat this step seriously almost always see stronger offers.

I sit down with owners every week to map out strategic options and M&A strategies that make the most sense for their situation. There is no charge for that first conversation. Reach out if you would like to talk through where your company stands today. A few weeks of preparation here can change the entire trajectory of your sale.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality

Recent data shows stock sales make up only about 23 percent of M&A deals, especially in the middle market. Asset sales dominate because they let buyers leave unwanted liabilities behind. Here is how the two structures compare and when each makes sense.

Subscribe now

Tax Consequences for You as Seller

In a stock sale you pay capital-gains tax on the entire proceeds, usually at the long-term rate. In an asset sale the company itself is taxed first on the gain from each asset, then you are taxed again when the proceeds flow to you as a shareholder. That double tax can feel painful, but there are elections like 338(h)(10) that sometimes let you treat an asset sale as a stock sale for tax purposes. In my experience, knowing these elections early can save owners hundreds of thousands without changing the buyer’s structure preference.

Liabilities and Risk

Asset sales are cleaner for buyers because they pick only the assets and contracts they want and leave lawsuits, old debts, or employee claims with the selling entity. Stock sales transfer everything, which is why buyers demand bigger escrows and longer indemnification periods. If your company has clean books and few known risks, you have leverage to push for a stock deal.

Speed and Contract Transfers

Stock sales close faster because there is no need to reassign leases, customer contracts, or licenses one by one. Many contracts have change-of-control clauses that require consent. Asset sales trigger those consents and can add weeks or months. If speed matters more than tax savings, a stock structure can be worth the conversation.

When Buyers Push Hardest

Private-equity buyers and family offices are often more flexible on structure than corporate strategic buyers, who may need assets for integration reasons. In deals under $50 million, buyers frequently insist on asset purchases unless you have strong reasons otherwise. The key is to know your walk-away point before the letter of intent arrives.

How to Prepare Either Way

Review your contracts, leases, and licenses now. Get a preliminary tax analysis from your CPA showing the net after-tax difference between the two structures. That single page becomes powerful ammunition at the negotiating table. The earlier you run the numbers, the more options you keep open.

These two structures are not just legal details. They determine how much you actually take home and how smoothly the deal moves. Spend time on this decision before you start marketing, and you avoid the most common source of last-minute surprises.

I often sit down with owners to map out exactly which structure makes the most sense for their situation. There is no charge for that first conversation. Reach out if you would like to talk through where your company stands today. The right structure can easily add substantial sums to your net proceeds.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality

The good news is that none of these levers require a complete overhaul. Most can be improved in the twelve to twenty-four months before you decide to sell. Here is exactly what buyers look for and how you can pull each lever in your favor.

Subscribe now

Lever 1: Recurring Revenue Streams

Buyers love predictability. A business with 60 percent or more of its revenue locked in through subscriptions, maintenance contracts, or long-term service agreements commands a noticeably higher multiple than one that starts from scratch every month.

In my experience, converting even a large portion of project-based revenue to recurring contracts can lift the valuation multiple by two turns or more. Recent M&A data on managed service providers and software businesses shows companies with strong recurring revenue routinely trade at 9–12 times EBITDA, while project-heavy peers clear only 5–6 times on the same profitability.

Start small. Look at your top customers and offer them an incentive to move to a quarterly or annual agreement. Document every renewal rate. Buyers will dig into those numbers during due diligence, and strong retention figures become one of your best selling points.

Lever 2: Diversifying Your Customer Base

Nothing scares a buyer faster than hearing that one client accounts for 30 percent or more of your revenue. They immediately picture what happens if that customer walks.

The fix is straightforward but takes time. Identify your largest clients and deliberately go after two or three new verticals or geographic markets. Reducing reliance on any single customer below 20 percent of revenue often changes how buyers perceive the risk of the business. Industry studies show that concentrations above 25 percent can trigger 15–35 percent valuation discounts or force buyers to demand earn-outs and heavier escrows.

Lever 3: Consistent EBITDA Growth

Buyers do not just look at your current profit level. They buy the trajectory. A company showing 15 percent compounded growth over the last three years will almost always trade at a higher multiple than one that is flat or erratic.

The key is to make the growth visible and repeatable. Track monthly EBITDA, cut obvious waste, and invest in the activities that drive the top line. I recommend owners build a simple rolling twelve-month view so trends jump off the page. When a buyer sees steady upward movement, they start imagining what they can do once they own it.

Lever 4: Improving Gross Margins

Buyers pay close attention to how much profit you keep on every dollar of revenue. Strong gross margins signal pricing power, efficient operations, and a product or service that customers value enough to pay for.

Review your cost of goods sold line by line. Can you renegotiate supplier contracts? Can you raise prices on your most loyal customers without losing them? Even modest margin improvements flow straight to the bottom line and can have an outsized effect on the multiple buyers are willing to pay. Recent SaaS and software transaction data shows companies pushing gross margins above 80 percent routinely command a 100 percent-plus premium to the market average.

Lever 5: Building a Strong, Independent Management Team

The moment a buyer realizes the owner is the business, the valuation drops. They do not want to buy a job; they want a scalable asset.

Start delegating key decisions now. Promote or hire people who can run day-to-day operations without you. Document their responsibilities and show a clear org chart. Buyers routinely pay a noticeable premium for businesses that can run without the owner on site. In my experience, the absence of a solid second-tier team is one of the fastest ways to see a 15–25 percent haircut in the final offer.

Lever 6: Cleaning Up and Normalizing Financials

Buyers hate surprises. Messy books, personal expenses mixed in with business ones, or missing records all create doubt and lower offers.

Spend the time to get your financials audited or at least reviewed by a CPA. Remove owner perks and normalize any one-time expenses so the true earning power shines through. I have seen owners add hundreds of thousands to their valuation simply by presenting clean, professional financial statements that a buyer can trust on day one.

Lever 7: Strengthening Your Competitive Moat

What keeps competitors from copying you tomorrow? It could be proprietary technology, a unique process, exclusive contracts, or even a powerful brand in your niche.

Take inventory of what truly sets you apart and protect it. File the patent, lock in the key supplier agreement, or build the customer loyalty program that competitors cannot match overnight. Buyers consistently pay more for businesses with a genuine, defensible edge. The stronger that moat, the less risk they see and the higher the multiple they offer.

These seven levers work together. Pull two or three of them hard and you will see the valuation move. Pull all seven and you position your company to attract the best buyers and the strongest offers.

If you are even thinking about a sale in the next few years, the smartest move is to start on these improvements now. The earlier you begin, the more time you have to let the results compound.

I sit down with owners every week to map out exactly which levers make the most sense for their situation. Reach out if you would like to talk through where your company stands today. There is no charge for that first introductory meeting. The difference between an average exit and a life-changing one often comes down to these seven numbers.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality

The M&A Advisory team you select will play a significant role in the amount of value created in the deal. An exceptional advisor:

• Asks “Why”?: An exceptional advisor asks “Why” to continuously validate assumptions, eliminate wasted effort, explore new deal options, and sustain deal focus.

• Understands your business: The M&A advisor must have an empirical view of current and future industry trends, enabling technologies and interdependent industries that significantly increases the value ceiling. As a result, they will develop an optimal set of investment candidates for each client.

• Spearfishes: An exceptional investment advisor will find those investors and companies that most value a specific client’s offering. Great advisors use structured frameworks to build a well-defined target profile, the advisor will quickly identify ideal matches for each client.

• Leverages global reach and local insight: A good advisor will leverage an expansive global investor network that connects multiple industries. An effective advisor will leverage access to trusted M&A colleagues with a deep understanding of financial markets, industries, and companies in each region of the world. This allows them to open discussions with new investors and corporate networks that promise to hold a most significant interest in the deal.

• Takes business, personally: A good advisor is continuously mindful that M&A success depends on people to embrace and support implementation – before and after the deal. They know that business is personal and that its most significant value asset must be supported, nurtured, and challenged.

Choose an investment advisor who also possesses the five qualities mentioned above. If you do, you will capture exceptional value in your deal.

Why are so many M&A Advisors poorly rated?

Being an M&A advisor is not an easy task. We have just talked about the characteristics that a good advisor must have to be hired for your company’s transactions. But it is normal for a business owner who thinks about selling his company to be afraid of hiring advisors.

It is a crucial decision, there is a lot on the line, and many things are going through his head: “Are they going to fight for my best interest? Do they have a large enough contact base to sell this? What if the charge me a lot of money, make us work, play around and then nothing happens?”.

It is true, a lot of “advisors” do not do practical work. They are good at documentation, valuations, analysis, etc. But they do not know how to locate the right buyer; they do not have the technical and human resources needed, so they cannot spend the necessary time to find the right buyer. That is why, regardless of their efforts and excellent skills, they fail to sell your company and let you down.

“Our experience in dealing with more than 2000 mandates has shown that 70% of the outcome of a business sale is based on an extraordinary amount of work on the buyer search and contacting of the key decision-makers. That is an intensive and heavy workload that cannot be done by a small team or a single advisor; the reality is that without a strong support system, they will not be able to do it”.

-Enrique Quemada, Chairman of ONEtoONE Corporate Finance

If this is your company and is the most critical transaction of its history, you deserve an elite team working to maximize the transaction sale value. If you want to sell your company, make sure that the advisor you choose can provide you with this level of search capabilities to find your buyer and beware of the buyer who attacks your advisor.

If you sell a business, be warned that buyers know that advisors play a very relevant role for the seller, and some will try to bypass them and speak directly to the company owner.

“Once the conditions for the contract and a deadline to sign the SPA had been set, the buyer asked to have a personal meeting along with our client. The buyer asked for a 30% payment deferral in the meeting, and our client agreed. The next time we met with him, he told us what had happened. When we asked him what guarantees they had given him for this payment, he did not answer. He had not gone into detail with the buyer, and he soon realized what a mistake he had made not having his advisors with him when making concessions”.

In some cases, a buyer tries to gain the client’s trust and encourages him to forget about his advisors, insisting that things will be smoother if they speak one-on-one. Don’t fall into this trap - they are likely thinking they can negotiate with a less experienced person to get a better price.

How can the advisor help his client?

When a business owner asks for advice on his company’s future, the advisor faces two types of clients: those who want to sell their business but do not know-how, and the ones who should sell their company but do not know it yet. What both business owners have in common are significant reasons to sell their businesses. These reasons tend to be:

• The proximity of retirement.

• It is unable to keep up with competitors.

• Lack of sufficient resources to implement the latest developments in his sector.

• Personal reasons such as health issues, being tired after years of hard work or the desire of spending more time with family and loved ones.

For an excellent professional dedicated to clients’ advice, such as a lawyer or a financial advisor, it is vitally essential to advise and guide him towards the best possible decision.

At ONEtoONE, we are a firm specialized in M&A that supports our clients throughout the entire sales process. We offer a 100% specialized service to maximize its value and thus create interest and competition for it. We achieve this thanks to our international team of financial and sectorial experts. Our cutting-edge technology has allowed us to develop a proprietary methodology and developed our proprietary methods.

We guarantee the clients that we will always comply with our three pillars during the sales process: methodology, competence, and transparency. ONEtoONE applies its values and methods in all its services: sale and purchase of companies; mergers, business valuations, investor search, strategic financial advice, and financial advice.

ONEtoONE Corporate Finance is a global investment banking group with 200+ M&A Advisory specialists in over 30 countries and 50+ cities worldwide. They have advised on over 2000 successful M&A transactions, with >70% being cross-border deals.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality.

However, they should not be considered a long-term solution. The most important word is “Transitional”. These agreements should be temporary, and a guiding principle of carve-outs should be to avoid TSA’s whenever possible. Where they can not be avoided, they should be as brief as possible. In this way, they enable (rather than delaying) the carved-out business to become fully independent. Below are the top-5 questions about TSA’s for those involved in a carve-out situation.

What is a Transitional Service Agreement (TSA) in a Carve-Out?

A Transitional Service Agreement is a temporary contract between the parent company and the carved-out entity, detailing services the parent will provide post-separation to ensure operational continuity. These services, like IT, HR, or logistics, typically last 6–24 months while the new entity builds its own systems. TSAs are vital because carve-outs often leave the new entity dependent on the parent’s infrastructure, and without a TSA, operations could stall. A major objective of all carve-out projects is to ensure “Day-1 Readiness” of the carved-out business. That means the new business should be able to run as independently as possible on Day-1 after the carve-out is completed.

All TSA agreements should specifically detail service scope, duration, costs, and performance standards to prevent disputes and ensure a smooth transition. When the carve-out is in connection with a divestiture (i.e. the carved-out business is being acquired by a new owner), it is the new owner that should determine whether a TSA is truly needed.

The above example covers IT services post carve-out. But the same principle applies to a range of possible services. For instance, logistics, warehousing, marketing, payroll systems etc. These are all common areas for TSA’s. In the case of a company acquiring the carved-out business, they should ask which processes can be absorbed into their existing systems and processes. Good post-merger integration programs can mitigate the need for longer TSA’s.

What Are the Key Components of a TSA?

A TSA typically includes four key components: scope of services, duration, pricing, and performance metrics. The scope defines what services the parent will provide, such as IT or accounting support. Duration sets the timeline, often with extension options. Pricing outlines costs, which may be fixed or variable, ensuring transparency. Performance metrics, like service-level agreements (SLAs), hold the parent accountable for quality and timeliness [Note: I’ll cover SLA’s in a subsequent article]. These components create a clear roadmap, preventing misunderstandings and ensuring both parties know their responsibilities, like a detailed playbook for a smooth handoff.

What Are the Challenges of Implementing a TSA?

Implementing a TSA can be challenging due to misaligned incentives, unclear terms, or operational complexities. The parent may prioritize its own operations, leading to subpar service for the new entity. Vague terms can cause disputes over costs or quality, while complex operations may strain the parent’s resources. To address these, both parties must negotiate clear terms, align incentives, and monitor performance closely, like refereeing a game to ensure fair play. And this is before the most crucial challenge of all: time. It takes time to negotiate a TSA. Think of the specificity involved and stakeholder alignment needed. If the carve-out is in connection with an M&A transaction then the TSA terms could even impact the valuation and price being paid. If the parent company is not providing sufficient flexibility on TSA’s, the acquiring company may abandon the deal entirely. This is why it is critical to have an advisor that has done this before. They’ll understand the time needed, stakeholders required and address potential risks early on while they can still be handled “easily”.

How Long Do TSAs Typically Last, and Can They Be Extended?

TSAs typically last 6–24 months, depending on the complexity of the carve-out and the new entity’s readiness to operate independently. The duration is set to balance the need for support with the goal of the new entity becoming self-sufficient. However, as a general principle they should be for the minimum required duration so as not to delay true “Day-1 readiness”. For complex systems and services, it is often the case that TSA’s have to be extended. But beware that any negotiation for an extension will happen after the carve-out or M&A transaction has closed. The former parent company may be unsympathetic to potential disruptions because the new company is not ready by the end of the initial TSA. That is why extensions often come with renegotiated terms and considerably higher costs. Clear exit strategies and milestones in the TSA help both parties plan for a smooth end to the agreement, like setting a finish line for a relay race.

TSA’s are inevitable for any complex carve-out, providing a lifeline for the new entity as it gains independence. For companies navigating carve-outs, a well-crafted TSA is like a bridge over turbulent waters—essential for reaching the other side intact.

The most important message I can give for those tasked with executing a carve-out, or businesses contemplating a carve-out is this: Carve-outs are hard, and you need an advisor that has done it before. The vast majority of companies have no internal expertise with this kind of project. This is not their fault, carve-outs are highly specialized activities and businesses don’t do them very often.

I am available for interim carve-out advisory engagements. If interested, please contact me at stephen.mcnamara@onetoonecf.com for an introductory discussion.

Exclusivity is giving a single advisor – or a single advisory firm – exclusive control over the negotiation, the search for potential buyers, and the overall process of selling a company.

Within the world of commercial sell-side and buy-side advisory, there are different types of advisors. You can find either Brokers or Professional Advisors.

Brokers

A broker is a person you hire to sell your business in exchange for a percentage of your business. In this case, you will not give any exclusivity and the process will not be confidential. The broker will spread the word that your company is being sold because that is what you have commissioned them to do, and very quickly the whole market will know about it.

You may even think that by having more than one broker you will get more and better offers, but this is a serious mistake. Two brokers may claim that they have found the buyer, creating an unresolvable conflict.

The broker is in charge of indiscriminately launching the sale offer to the market. They look for a buyer, and they will find one, but not necessarily the best one or the one who can pay the most for your company. It is in the broker’s interest that the transaction proceeds as quickly as possible so they can collect their percentage.

“Remember that a Broker will look after their profit more than yours”

Professional Advisors (Sell-Side and Buy Side)

Professional Advisors bring enormous added value that directly benefits you in the sale of your company. They carry out a properly planned, organized, and structured operation from start to finish, with confidentiality assured.

Granting them exclusivity means that they contact not the first buyer that comes along, but those who are interested in buying your company and can pay the best price, while assuring you that they can afford to pay. A professional advisor has the necessary knowledge to recommend to you not to sell at a certain moment if they believe that the offer is insufficient and that they can obtain a higher price.

Their mission is to protect the business owner and prevent the possible loss of value of the company during the sale process, which can happen if the sale process is disclosed indiscriminately. A professional Advisor will ensure complete confidentiality, as this can have a positive impact on the final sale price.

Likewise, an Advisor will not contact anyone you do not want them to. A broker cannot guarantee that, as their offer is indiscriminate.

A Professional Advisor will always try to get the best price for the sale of your company, even if that means waiting for the right offer”

The importance of confidentiality in the sale of a company

As we have said, granting exclusivity to an advisory firm has a major benefit for you: it guarantees confidentiality. But why is confidentiality so important? For the simple reason that if word gets out that the company is being sold, it could reduce its value. This will hurt the final sale price. You may also not want your competitors to know about the sale of your company.

If you do not grant exclusivity you cannot enjoy confidentiality. You can not expect several brokers to compete to find a buyer and at the same time do so confidentially.

Ensure the confidentiality of your advisory team by signing a Non-Disclosure Agreement (NDA).

The benefits and value of having an advisor in the sale of your business

Once you have contracted a firm specializing in the sale of businesses, they will assign a team of between four and six people to the sale of your company. This team could be bigger if the process is carried out at an international level and the firm utilizes offices in different countries.

Once the sales process gets underway, this is where you will see the value of giving exclusivity to an advisor and the time and resources they dedicate to:

• Carry out a company analysis.

• Prepare documentation: information memorandums, blind teasers…

• Carry out a company valuation.

• Conduct a database and market analysis.

• Find companies across the world that could have synergies with yours. This involves analyzing their financial statements and past acquisitions.

• Discard those that don’t fit: Determine the decision-makers in those corporations and find their contact details, a job that takes hundreds of hours.

• Contacts: The heads of businesses interested in purchasing your company are contacted. The opportunity is explained to them and they are sent all the necessary documentation: blind teaser, NDA and Information Memorandum.

• Negotiation: Here begin the requests for a host of information about your company in all different formats, a cross-checking of data, meetings, and visits that can last for weeks and culminate in an Indicative Offer. This process is repeated depending on the number of companies being dealt with.

After all of this, the advisory team will have committed more than 1000 hours of work across analysts, managers, database teams, search teams, directors, and partners. And at least 50% of the work remains until the transaction closes. The sales process can take time and the end of the operation comes with the closing of the transaction.

Professional advice on the sale of your company

A professional firm specializing in sell-side and buy-side advisory, with trained and experienced advisors, cannot take on the project of selling your company and making such an investment into it without a reasonable expectation of getting paid for it.

“For your professional advisor, your profit on the sale of your company is their profit. Their incentive is that the more you earn, the more they earn”

To ensure this optimal outcome, all serious advisors require a period of exclusivity. In return, they will work with the tireless commitment of their teams of experts in accounting, finance, negotiation, strategy, legal, and tax, including advisors across international offices.

All this dedication deserves your loyalty to your advisors in return. Your relationship with them should be based on trust and transparency. They will work exclusively for you so that you get the maximum benefit. 90% of their remuneration will come from the closing of the transaction. Therefore, maintaining a relationship of trust and reciprocity until the closing of the sale is vital, both for your interests and theirs.

Avoid risks by giving exclusivity to an advisor who specializes in sell-side and buy-side advisory

If you are considering the sale of your company, the best option is to give exclusivity to an advisor with real experience and work with them professionally.

They will help you prepare the company for sale, and decide on the best way to approach and which candidates to contact. They will devise the best strategy for your interests:

• Taking the process seriously.

• Preparing robust documentation.

• Valuing the company.

• Identifying which companies would fit as buyers.

• Finding the ones that can pay the most.

Giving exclusivity to an advisor who works for you as part of your team, and has a commitment on both sides, prevents you from making mistakes. It also substantially increases the chances of selling the company and getting you a much higher price.

“Only professional advisors can create a competitive process and negotiate the different offers for the sale of your company, guaranteeing you the best result”

When you start the process of selling your company, you may encounter brokers who will tell you that they can work with you on a non-exclusive, success-only basis and that you will only pay them if they succeed in selling the company. This is a serious risk. This type of broker will work only to close the deal at whatever price, as quickly as possible.

You will sell your company only once. Turn that transaction into a reward for a lifetime of job and wealth creation. You only need patience and the best professional advice.

ONEtoONE Corporate Finance is a global investment banking group with 200+ M&A Advisory specialists in over 30 countries and 50+ cities worldwide. They have advised on over 2000 successful M&A transactions, with >70% being cross-border deals.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality.

This section of DealFlow is dedicated to the topic of carve-outs and how to execute them. I won’t cover an entire carve-out in one article. Rather I will do small articles covering specific topics. Individually they will seem “incomplete”, but together I hope they emerge as a valuable resource to those tasked with executing the most complicated project a business can do.

The most important message I can give for those tasked with executing a carve-out, or businesses contemplating a carve-out is this: Carve-outs are hard, and you need an advisor that has done it before. The vast majority of companies have no internal expertise with this kind of project. This is not their fault, carve-outs are highly specialized activities and businesses don’t do them very often.

I am available for interim carve-out advisory engagements. If interested, please contact me at stephen.mcnamara@onetoonecf.com for an introductory discussion.

Subscribe now

Question 1: At what level will the carve-out occur?

The very first step in defining the carve-out concept is to define the status quo and carve-out objectives. While this seems obvious, it can actually be harder than it seems. Sometimes the Executive Board has not fully aligned on what is to be carved-out. In many cases, the parent company has been built up over so many “bolt-on” acquisitions that nobody actually knows what the company’s legal entity structure even looks like. Key questions include: what specifically do we want to carve-out?

Here is an illustrative example based on my own experience. Imagine a conglomerate with multiple Business Segments organized at industry level. Within each Segment are several Business Units, either based on a Product Category or Region. Within each Unit are Local Operating Entities. The Executive Board decided to try divesting individual Business Units. That meant the a corporate transformation program designed to make each Business Unit as “independent” as possible. This was the starting point for the carve-out concept as it defined the level at which the carve-out would occur.

Question 2: What is the main objective of the carve-out?

This question is simple to answer at a high level. The main objective of a carve-out is to ensure the business being separated can operate independently on “Day-1” and be seamlessly transferred to new owners. Even if the objective does not involve divesting the business, having the option of “easily” doing so is a clear benefit of carve-outs.

Question 3: What are the major interdependencies that need to be dealt with?

This section is “high level”. I’ll do individual deep dives in later posts for each of the major interdependencies listed.

Once the decision has been taken to carve-out a specific business, the question becomes “where to begin?”. The very first thing management teams should do (aside from get experienced advisors in place) is to assess major interdependencies. Specialized teams of advisors will be formed around these categories as they will require significant time and expertise. In general, there are 6 major categories (others will emerge in the project, but these are “the big six”).

1. Shared Processes: shared services and process interdependencies bewteen corporate entities. Once identified, assign what should happen to each (e.g. get absorbed by buyer, discontinued, Transitional Service Agreement (TSA) etc.)

2. Shared People: related to the first category, headcounts / FTE’s are often shared across legal entities. They need to be identified in order to give management an idea of how many people may need “special attention” (e.g. workers’ council alignments, union considerations, employee choice about whether they want to stay with the parent vs. carved-out business etc.)

3. Sites and Locations: Large businesses have offices and facilities around the world. They all need to be listed with clear assignments. Those that are dedicated to the unit to be carved-out are easy. In cases where facilities are shared between entities to be separated, individual plans need to be developed. These often have to consider local requirements (e.g. permitting, licenses, registrations etc.)

4. Intangible Assets: Depending on the business, patents and trademarks may be shared across entities being separated. These can often drive significant value for both. Careful attention to how these will be allocated during the carve-out is needed

5. Contracts: Businesses often have hundreds of thousands of contracts. A dedicated team will have to review each one and look for things like “change of control clauses”, customer notification requirements etc. Customers will also have questions about how their contract is impacted the moment a carve-out is announced. The contracts team will need to work closely with the communications team.

6. Systems: Shared IT systems and corporate applications are usually more numerous than you think. Moreover, they take specialized know-how to deal with during a carve-out. Systems needs a specialized team and is often the biggest and most complex part of the carve-out. For example, imagine you are splitting 40+ legal entities (not uncommon for big companies doing carve-outs). That is 40+ new payroll systems that will have to be established, in flawless coordination with multiple departments to ensure there is no payroll disruptions.

   ---

   Carve-outs are hard, and you need an advisor that has done it before. If you are considering a carve-out and looking for a potential advisor then please contact me. I am available for interim carve-out engagements.

   My email: stephen.mcnamara@onetoonecf.com

   DealFlow: Buy, Sell, Grow is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

These are undoubtedly the most frequently asked questions in our meetings with clients: How much does it cost to sell my company? How much does an advisor receive from the purchase/sale of my company? The answer is a classic and can be summarized in two words: it depends.

The first thing to understand is that many professionals will be needed to properly sell a company. Financial Advisors (M&A Advisors), Lawyers, Tax Advisors (not the same as financial advisors), Notaries are all crucial figures - and they all charge for their services. When you decide to sell your company professionally, you will have to ask them about their fees individually.

Your first contact will be the Financial or M&A Advisor who will accompany you through the entire process of selling your company. In general, they charge two types of fees: Fixed Fees and Success Fees.

Fixed Fees or Retainers

Fixed fees or retainers are charged regardless of the outcome of the process. They are commonly associated with documentation delivery or with the achievement of specific landmarks during the sale process. It is not uncommon for the advisor to offer to deduct these fixed fees from the success fees. The truth is that they usually only represent a tiny part of the total costs in the event of deal closure. However, they are still a cost that the business owner must “advance”.

The controversy around fixed fees is their relevance, that is, should I pay them or not? This doubt arises because some advisors work only on a success-fee basis. There is a proverb that says: “What does not cost is not valued” or “You get what you pay for”.

When a business owner starts the process without spending a penny, they have not embraced the sale of the company and they will always be tempted to pull out at any time. Also, a business owner who does not trust their advisor will think that if they have not made the right choice of advisor, at least they have not spent any money. Perhaps the business owner has repeatedly heard cases of friends, saying “They charged me and did nothing”, or perhaps they have already experienced it themselves. While we cannot guarantee that this will not happen, most of the time this lack of professionalism occurs when the transaction has been put into the hands of people who do not work exclusively in this profession. Some excellent professionals will dedicate many hours to the sale of your company. Ask your lawyer, your tax advisor, a competitor who has already sold, or search on the internet for reference. Even if you believe that you have found an advisor in your first meeting, try to obtain a few different proposals and compare them. Remember that you are only going to sell your company once.

Let us go back to the option of not paying fixed fees, but now lets look from the advisor’s perspective. Not having an initial fee in the process swill also affect the advisor and could generate a conflict of interest in the long run, as they may want to close a deal at any cost and without considering whether the chosen buyer is the best option for their client. This would, in part, be due to the advisor’s fear of not closing the transaction and thus not obtaining any fee (if everything is dependent on success), despite having given away time and work.

But what is fair? This is a question that has no easy answer, especially for very different firms (e.g. one with $5 million in revenues vs. $500 million). Every company has different peculiarities and complexities. But what we can say is that at ONEtoONE, each project, no matter how small will have at least two people working on it and could have up to ten. Think about the cost of a senior employee in your company and the hours that they will dedicate each month to a project, and you will have a very rough idea of the price range for fixed fees.

Success Fees

These fees are understood and accepted by all clients. Their name says it all; they are obtained upon the completion of a project, whether that is selling or buying a company that you have been looking for.

However, they can also be complex to calculate. In the sale of a company, the norm is to pay a percentage of the company’s agreed value, since the higher the price achieved, the greater the reward for both the client and the advisor. And what is the percentage rate applied? Again, this is difficult to answer, but there is at least a commonly accepted rule: the rate will be inversely proportional to the transaction size; that is, higher percentages will be incurred in smaller transactions, and lower rates will be incurred in larger transactions.

Do not get carried away by what a friend who has read in a newspaper about a large transaction tells you. Again, different companies have different circumstances. The purchase/sale of a family company is not governed by the figures of Nasdaq-listed companies. The risk of selling, or rather not selling, a small or medium-sized family business is much greater than in large multinationals. For greater risk, there is a higher cost. The range of rates is very wide for family companies and usually goes from 1% for large transactions to 6% for small transactions, based on the transaction value.

Make sure you demand that the rate applied to your transaction is justified. To avoid surprises, grab a calculator and with an estimated value of your company, do the calculations to avoid scares or misunderstandings in the future.

ONEtoONE Corporate Finance is a global investment banking group with 200+ M&A Advisory specialists in over 30 countries and 50+ cities worldwide. They have advised on over 2000 successful M&A transactions, with >70% being cross-border deals.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality.

The time frame required to sell a business depends on the complexity of the operation, and in turn the size and circumstances of the company to be sold. Generally speaking, the sale of a company takes 9 to 12 months, but can take longer (18+ months) for more complicated situations. For instance, I was involved in the carve-out of a global industrials business from its parent conglomerate. The company being carved-out was heavily integrated in many of its global locations to other parts of the conglomerate, and getting it fully carve-out was a two year process.

In any company acquisition or sale transaction, time is money. Maximizing the value of your company during the sale will, in no small way, be determined by knowing where your time and money is in the selling process.

Why does it take so long to sell a company?

There are several reasons that justify the investment of time in this operation. If you want to realize a sale with all the value obtained in a long life of wealth creation, the first and best strategic decision is to invest in hiring specialized advisors.

Selling a business is a complex process. For the seller, it can be the most crucial decision of their life. Considering that it is a process that they will go through only once in their life (in most cases), it is normal that the preparation for this decision brings time for reflection and analysis. The seller can make errors of judgment forced by emergencies, such as health problems. Even in that case, having a trusted advisor allows you to face your personal reality with the peace of mind of knowing that your company’s sale is in good hands, without having to accept the first offer presented to you. A good advisor can also help you identify the best time to sell your company.

If the company also has several shareholders, imagine the time it takes to reach an agreement between all of them about the sale’s objectives.

The buyer needs to check and ensure that the value of his purchase is real. When it comes to investing money, rushing is not best practice and preparing the necessary documentation that reflects the real value of a company requires time and professionalism.

Finally, from the point of view of the process itself, all this time is required to maximize the company’s value and carry out the unavoidable phases of a sale and purchase transaction, with all the necessary documentation and negotiations

Doing all this while ensuring that the company does not lose value during the sale process is not an easy task.

And here another question comes as a surprise: can my company lose value during all that time? The answer is, sadly, yes. The sale is a very long process, and if the seller dedicates themself exclusively to this process, they may lose contact with the company. That makes its results decrease and, therefore, its value. As an entrepreneur, the time you dedicate exclusively to the sale of the company will reduce its value and the possibility of profiting from the sale.

The best way to spend your time as an entrepreneur during the sale of your company is to dedicate yourself to it until the process is complete. It is your best contribution to the process, leaving the fieldwork to professional advisers and supervising them.

Time frames for the Phases of the Sale

Phase 1: Analysis of the company and the operation

In this first phase, you have to reach an agreement with shareholders and prepare the company for a sale. Two documents are prepared: the blind profile and the company’s sales notebook. The information memorandum must reflect the reality of the company and its most positive aspects, so that potential investors have the necessary information to assess the purchase. Once the analyst team has all the information about the company, they can prepare the sales notebook in 1 month.

Phase 2: Preparation of the Valuation Report and search for candidates

The Valuation Report helps the seller know their company’s value and can take 1 month to prepare. Regarding the search and screening of candidates, it is one of the most difficult phases and requires a greater investment of time. Being able to filter up to 700 applications, this phase can last up to 1 month.

“Having to analyze and filter more than 700 companies, the candidate selection phase can take up to 400 hours”

Phase 3: Investor Search and Project Presentation

This phase is time-consuming in assessing the interest of all potential buyers. For each selected application, you must find the appropriate contact, send each of them the teaser of the operation, as well as a confidentiality agreement (NDA). The objective is that each one returns the signed NDA, so that the company’s Information Memorandum can be sent to them.

Considering that you have to negotiate with many people simultaneously, and with each one in different phases, this phase can easily take 2 months.

Phase 4: Negotiation of the sale between Buyers and Sellers

In this phase, the seller and buyer finally come into contact, the necessary documentation is sent, and a period of resolution of doubts (of all kinds) is started. Until a Binding Offer materializes, a resolution usually requires many conversations: the buyer requests exhaustive information and consults with his own team and with the seller; you need full confidence in your investment. This period can last an estimated time of 2 months, depending on the agility of both parties’ responses: Seller and Buyer.

Phase 5: Due Diligence

Due Diligence is a process of profound and professional analysis that the buyer commissions about the company for sale. The buyer wants to make sure of the value of what they are buying and contacts auditing companies and tax specialists to prepare a document that can cost between € 40,000 and € 100,000. All this searching, analysis and coordination of information delivery between the two parties can take up to 3 months

Phase 6: Closing

After the agreement, the closing requires the preparation of a Sales & Purchase Agreement (SPA), which a specialized commercial lawyer must prepare. The preparation and negotiation of this contract and the parallel documentation (such as shareholder agreements) can take between 1 and 2 months

Is it possible to make the time frames profitable and even shorten them?

Now that you have an idea of the process and its timeframes, you will ask yourself one last question: is it possible to shorten the timescale ofthe sale ofthe company? Yes, it is possible.

The key to shortening this time as much as possible is planning, with professionals who know how to provide the appropriate documentation and who have experience in negotiation. By presenting the information in an agile and clear way, fewer buyer doubts will arise, and the timeframe of sale is shortened. Additionally, advisors understand decision times and know the times of the year when activity slows down. Knowing this, they avoid unnecessarily lengthening the buying and selling process.

In the same way that you would not build a house without an architect, the recommendation is that you do not sell your business without an advisor’s help.

ONEtoONE Corporate Finance is a global investment banking group with 200+ M&A Advisory specialists in over 30 countries and 50+ cities worldwide. They have advised on over 2000 successful M&A transactions, with >70% being cross-border deals.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality.

Buying or selling a company can be complicated and managing confidentiality is crucial. The first people to be required to maintain confidentiality are the advisors themselves, even before signing a mandate with them to sell your company. In our work as advisors in corporate transactions, we usually send potential clients a confidentiality agreement in which we undertake not to disclose any of the information provided to us regardless of the subsequent signing or not of a mandate (i.e. advisory contract).

If you are considering the sale of your company and are contacting different advisors, do not hesitate to request this confidentiality agreement to safeguard your sensitive information now and in the future operation.

Focusing on the buying and selling process, sellers usually look for higher confidentiality levels, but this depends on many factors and can vary company to company. For example, if the seller wants a high level of confidentiality, they must reduce the number of potential buyers they reach. This will slow down the selling process. On the other hand, if the seller is looking for faster results, they must broaden the potential buyers’ selection and by extension make it more difficult to control the confidentiality factor. To sellers, this can be a conflicting issue to consider.

“Confidentiality, in the world of business trading, is much more than keeping a secret”

It is possible to utilize different techniques during the buying and selling process to increase confidentiality, but many business owners are not even aware of them. Here are some examples:

1. Creation of a Blind Teaser: This document is designed to protect the company’s identity from being revealed when presented to potential investors. The Teaser reveals the company’s status, but not its name. If buyers show an interest, a confidentiality agreement is signed to protect their identity.

2. Signing and NDA: Confidentiality is crucial from the first day. There will be many agents involved in the process. Everyone exposed to this information must sign an NDA so that the idea and intent are protected and secure.

3. Letter of Intent (LOI): This is a document in which the buyer and seller put in writing the main points of the agreement they have reached. This text must include all relevant details. For instance, an LOI will include [not exhaustive]:

   1. Whether the transaction involves a capital increase

   2. Purchase of assets and liabilities (including specific assets or liabilities, if any) etc.

   3. Shares being acquired, the acquisition price and what percentage is being acquired (if buying a company outright, this is 100%)

   4. The methods of payment to be used

   5. Payment deadlines

   6. Price adjustment formulas and other types of renumeration

   7. Confidentiality of the agreement

   8. Period of exclusivity (in which the seller can no negotiate with other buyers) that encompasses the time required for Due Diligence and for the final purchase and sale contract to be developed

4. Virtual Data Room (VDR): If a deal has reached the point where a Data Room needs to be created, it means that we are close to closing the deal. In other words, we are at a very sensitive point where confidentiality is vital. That is why the Data Room is designed to protect the information. They create a virtual space where the seller will hand over all the necessary documentation to the potential buyer, to proceed with the transaction. Information delivery is done through online software that prevents printing the contained documentation, avoiding uncontrolled data leaks.

What is the Virtual Data Room (VDR)?

A Virtual Data Room (VDR) is a virtual space where the seller uploads all the necessary company documentation so that the buyer can have access to it and move forward with the process. This information transaction is extremely sensitive and should only be done when there is a reliable and trusting relationship between both parties, which means that there is already a willingness to invest and close a transaction.

This information transaction is carried out through a software designed to avoid any revelation of documents and to keep all the uploaded documents safe. The software must be a high-quality product that provides confidence, security and safety to both parties involved in the operation.

Imagine how difficult it could be for a business owner to expose the essence of his company. Aside from the emotional factors that make this operation difficult, this part of the process must meet all the requirements to guarantee security and peace of mind between parties.

ONEtoONE Corporate Finance is a global investment banking group with 200+ M&A Advisory specialists in over 30 countries and 50+ cities worldwide. They have advised on over 2000 successful M&A transactions, with >70% being cross-border deals.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality.

Confidentiality. This is almost always among the first words spoken between a business owner who has decided to sell their company and those to whom the decision is revealed, including the advisors in the transaction process. You are not wrong to demand confidentiality, as this is key to the success of the operation.

Why is confidentiality necessary? Should I tell my employees that I am selling?

Confidentiality is a cornerstone of any company purchase or sale transaction. Therefore, in any corporate operation, the confidentiality agreement (NDA) must start from the first moment. Even if the owner just has the idea in his head but has not firmly decided to sell, getting an NDA in place is critical to ensuring word does not get out. If you follow this recommendation now, you will save yourself a whole lot of pain and anguish down the road.

It is appropriate to inform the key people who will participate in the process that the company is for sale, by supplying them with information (usually the CFO) and asking them to keep it secret through a confidentiality agreement. With this transparency and gesture of trust, you avoid suspicions arising when asking them for information, reducing the likelihood they mention it to their colleagues. Normally, they will repay the trust you have shown them. It would be best if you did not discuss it with anyone else.

Confidentiality allows the parties involved (advisors, buyers, sellers, etc.) to share information in the transaction without any external agent discovering it. The mechanism that guarantees confidentiality in this type of operation is known as a Non-Disclosure Agreement (NDA). This agreement binds potential buyers who have been qualified to carry out the transaction (i.e. those having a strategic fit and sufficient resources. At these early stages, they have been provided with a blind profile and have shown interest in moving forward with the potential purchase.

“At ONEtoONE Corporate Finance, when we deal with potential buyers, we only do so with large international groups with professional teams specialized in corporate transactions that are very clear on the importance of confidentiality.”

Compliance with the NDA implies the non-disclosure of the information received (transmitted and perceived by observation). You should bear in mind that maintaining confidentiality is an essential tool, especially nowadays, due to the role played by new technologies making information much more accessible and immediate. The signing of an NDA obliges the parties to monitor compliance with a series of obligations concerning the information transmitted, not only at present but also in the future. Non-compliance by any one of the parties can negatively affect the operation’s development and closure.

But what happens if the information is leaked?

• Transaction price variation: How many times have we seen how a rumor in the market can change the share price? Rumors can sweep away the initial defined strategy, impact the valuation and sometimes even force the parties to abandon the deal.

• The exit of key professionals from the organization: The management team and key people in an organizational structure may feel threatened by the proposed transaction long before the new partners arrive and explain their new intentions. Losing these professionals can be disastrous for the operation, as the buyer may back out or lower the price due to the loss of value implied by the loss of key people for the company.

  “It would be best if you put in place means to prevent managers from leaving during the negotiation phases.”

  One measure we have applied on occasion with the business owner has been to inform critical managers of the idea of a sale in two years and reward them with a percentage of the transaction’s value. This encourages them to work together to improve financial ratios (and company valuation) during this period. Other times, we define a price that we consider reasonable with the employer and indicate to the managers that they will receive a percentage of the increase on that price. Therefore, they see a clear benefit in making a significant effort for the company, since they become business owners (to a certain extent) and they won’t leave by surprise before the deal is finalized.

• Confusion in the workforce: From the beginning, rumors of a new shareholder can generate nervousness among employees, directly affecting their work performance and, by extension, the company’s financial results

• Concerns of customers and suppliers: News of a new shareholder situation may cause uncertainty for customers, as they do not know whether they will be able to count on the company’s products and services under the same conditions. Suppliers may not know whether they will be able to rely on the approval of the new owners

Without M&A advisors, it is tough to maintain confidentiality and to carry out a rigorous search process for the best buyer. If you do not give exclusivity as advisors to a firm specializing in companies’ sales, do not expect confidentiality either. You can not expect two advisors to compete to find a buyer and at the same time do it confidentially.

ONEtoONE Corporate Finance is a global investment banking group with 200+ M&A Advisory specialists in over 30 countries and 50+ cities worldwide. They have advised on over 2000 successful M&A transactions, with >70% being cross-border deals.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality.

Deciding to sell your company is a big decision. Perhaps you haven’t made it yet but the thought has crossed your mind? Or you have decided but don’t know where to begin? Or maybe you have already started but are uneasy about the process?

Here are the 10 most common mistakes you should avoid when selling a business:

1. Not having a rigid valuation of your company

You can´t begin to sell your company without really knowing what it is worth. Given that, you will not be able to negotiate your price rationally with your potential buyers. You could be asking for a price which outweighs your capabilities or ignoring the fact that the real value of your business is much greater than what you are asking for.

2. Changing your interests or motivations for selling the business during the sale.

A good seller has to reflect beforehand about why he wants to sell his company and what he wants to do after it’s been sold. It could be damaging if you don’t have that clear in your mind when it becomes time to sell given that the buyer can notice strange changes in your attitude and raise concerns. They could also interpret your insecurity as a lack of honesty; and because of this your buyer could start to have doubts about you and subsequently your business. This raises his perception of risk and will inevitably lower the value he places on your company.

3. Negotiating with only one buyer

When you begin a negotiation with only one buyer and the buyer finds out, he will start to waste time and will leave every meeting asking for more concessions. The longer this goes on, the lower the selling price tends to get.

4. Not beginning the process with confidentiality

A lack of confidentiality can make the buyer abandon the purchasing operation and can also generate uncertainty in the market about the future of your company. In this way, it can fuel rumors and the market may begin think that your business has spent so much time up for sale because there are problems with it, which consequently would lead to an unwanted devaluation of your company.

5. Undertaking the process alone, not contracting advisors

The sale of your company is a laborious and time-consuming process. Throughout the process you ought to have in mind that the outcome of your company should be what is best for the business. Good advisors are transparent and keep you informed every step of the way.

Without good advisors it is very difficult to maintain confidentiality and ensure a rigorous search process for the ideal buyer.

Even the best negotiators can fail when it comes to the sale of their own business. This is not just any negotiation. You must bear in mind that there will be personal sentiments which are likely to largely influence your ability to negotiate as you no longer have objectivity. Having good a good M&A advisor is crucial to success.

6. Neglecting the business during its sale

As has already been mentioned, the sale of a company is a long process which requires a lot of focus and effort, therefore the fact that an entrepreneur would take on this task alone is baffling.

7. Limiting your scope to your local market

When trying to find the right buyer, it is critical to cast a wide search. This includes finding buyers outside of your local region. If you limit yourself to finding buyers in only one area it can lead to a reduction in confidentiality (local news gets out). It is also unclear that the potential buyers in this area would be the best for the company. Better to cast a wide search net.

8. Not assuming, where appropriate, that there are other minority shareholders (probably with particularly different motives or interests)

It is fundamental that all the shareholders are in agreement over the sale of the company. If there are minority shareholders that are not on board with the company sale, it could endanger the entire selling process and the efforts and money invested in finding a buyer would be in vain. You must make them participants in all that affects the company.

9. Wanting to rush the sale.

Rushing can end up in you losing the possibility of negotiating and finding the best buyer. Your buyer can tell if you are rushing, which may incite uncertainty and will give him ammunition to demand more concessions.

10. Not planning the process.

The selling process always needs to be planned; otherwise you could lose value at every stage. Disorder only brings risks and surprises which results in the devaluation of the company, the elongation of the process, the complexity in selling your business, and, as a result, the possibility of failure will rise.

ONEtoONE Corporate Finance is a global investment banking group with 200+ M&A Advisory specialists in over 30 countries and 50+ cities worldwide. They have advised on over 2000 successful M&A transactions, with >70% being cross-border deals.

Contact:

Stephen McNamara has over 15 years experience in Corporate Strategy, M&A, and Investing. He is currently a Senior M&A Advisor with ONEtoONE Corporate Finance. If you are interested in buying or selling a business or investing, please feel free to email: stephen.mcnamara@onetoonecf.com. All correspondence will be handled with utmost confidentiality.

Its the wrong approach. Numbers are important, but not always the driving force. Personal motivations of founders, family considerations and cultural identity can play an outsized role. I was reminded of this today when I read about Highlands Coffee’s planned IPO in Vietnam. Vietnam is the world’s second largest coffee grower and exporter (with exports to 20+ countries in 2024). Within this market, Highlands Coffee has risen to become the largest coffee chain with an estimated 40% total market share [take that Starbucks!!].

Over the last decade, they have grown at a blistering pace. By 2024, they had over 850 stores and grew revenues by 13%. They enjoy a strong local presence and connection in Vietnam. And more growth could well be on the way. Vietnam’s economy grew 7% last year and is benefiting from a significant investment boom. The company also has sizeable ambitions to grow their brand in international markets while emphasizing their Vietnamese origins. The importance of being “Vietnamese” is emphasized everywhere.

For example, the image above highlights their factory presence in Vietnam. They boast “25 years of history”, “ready to bring the taste of Vietnamese coffee to friends from five continents” [original text in Vietnamese, I translated it here].

They had originally planned to IPO in 2019, but this was put on hold due to Covid. Rumors again started to spread in 2022, but nothing materialized. Today’s news indicates that the IPO plans are back on and are more advanced than ever. Investment bankers have been engaged, the roadshow is being prepared, the CEO is giving interviews. Early indications suggest the IPO will value Highlands Coffee at $800 million. To put that in perspective, the entire Vietnamese coffee market was estimated to be worth $816 million by 2030.

This planned IPO valuation is bold. But given its strong business and growth prospects, it would well achieve this target. Probably the easiest place to IPO would be the US markets with the deepest pools of capital and large investor base. Rumors are that Highlands’ investment bankers first proposed listing in the US. The founder rejected it. Then they suggested Singapore or Hong Kong. The founder rejected it.

You guessed it. He insists on having his IPO in Vietnam. He has publicly acknowledged potential trade-offs of doing this, including the possibility of getting a lower valuation. But his quote below says it all:

“Our success is because of our Vietnamese customers, of our Vietnamese employees…our story is the Vietnam story”

Its not all about the money.

For those thinking of buying or selling businesses, it is important to ask and understand what are the non-financial value drivers you want to protect. Are there potential trade-offs you are willing to accept to ensure they are preserved? Community roots and engagement, cultural identity, personal legacy etc.?

This is not solely the domain of “small business owners”. It matters for bigger businesses as well. In the case of Highlands Coffee, the company may be worth over $800 million. The owner likely has enough money to be happy. For him, staying true to the company’s Vietnamese roots and remaining a “Vietnamese company” is mission-critical and he is clearly prepared to accept potential financial trade-offs.

Deals are not always all about the money. Non-financial considerations can have outsized importance. It is important to be open and upfront about these as they are critical to finding the right buyer, seller or investor for your business.