Big or small, businesses need time, value and a pre-sale plan
TORONTO, Nov. 12, 2013 /CNW/ - The Canadian Institute of Chartered Business Valuators (CICBV) has assembled 10 tips for positioning a business so the value
and attributes buyers find most appealing are front and centre.
Heartened by the activity in the business-for-sale and M&A sectors,
many business owners in Canada are mulling their options. And careful
pre-planning will be critical to a profitable sale.
"Business acquisitions such as Loblaws' acquisition of Shoppers Drug Mart or the sale of the Washington Post to Amazon's Jeff Bezos have attracted tremendous attention," said Sue
Loomer, a Chartered Business Valuator and spokesperson for CICBV.
"While these businesses are larger than most, their success in
attracting buyers depended on many of the same attributes that any
company must possess in order to pique interest, no matter their size."
Drawing on the insights from Chartered Business Valuators across the
country, below is a list of recommendations that businesses can use to
nurture the core traits that buyers will look for.
CICBV's TOP 10 LIST
Develop a business plan
A formal plan identifies challenges and opportunities, as well as
demonstrates that a business is ready for transition. The plan should
address what makes a business unique from the competition and how it
differentiates itself to ensure a competitive advantage. It should also
include a viable strategy that speaks to sustainable growth.
Build a solid management team
Owners need to make themselves redundant by building a management team
that can maintain and build the business with the same commitment,
skills, knowledge, and vision that made the business desirable to an
investor in the first place. Non-competition and post-acquisition
consulting agreements can also support a long-term sustainable
Update information systems
Ensure there are reliable and cost-effective information systems that
capture the data necessary to not only know how the business is
performing now, but also inform next steps. Robust information systems
give potential buyers confidence that they'll have access to accurate
data that drives more informed decision making.
Understand the market
Buyers typically pay the highest price in advance of a company hitting
its peak growth cycle. Market research and really understanding the
stage a business is at, relative to the industry's growth cycle, is
Understand the true value of a business
Often the value of a business is greater than its tangible assets. This
premium represents goodwill, which consists of intangible attributes
such as reputation, brand recognition and customer relationships.
Understanding this true value will lessen the likelihood of leaving
money on the table.
Take action to increase value
Since value is often directly related to cash flow from operations, look
at how this cash flow, as well as cost efficiencies, can be increased.
Buyers will want to know about available cash flow going forward, not
just historic levels. Then in determining a normalized cash flow,
adjustments should be made for remuneration paid to owners, as well as
discretionary personal and non-recurring expenses.
Optimize the balance sheet structure
Value can be added by removing non-operating assets that are redundant
to operations, minimizing inventory levels, and evaluating the
condition of capital equipment and debt-financing levels.
Do some housekeeping
Make sure all corporate statements and agreements, such as contracts,
leases, insurance policies, customer/supplier lists and tax filings,
are up to date and readily accessible.
Maximize value by minimizing tax
Businesses need to seek tax advice early and structure their company
appropriately before any major changes or investment status can take
place. Plus, tax-planning strategies can increase capital gains
exemptions, thereby improving the shareholder's bottom line.
While it may not be top of mind, succession planning is important and it
should be part of long-term goals for the company but also the business
owner. For instance, if growth and increasing the value of the business
is integral to retirement plans (it should be), then having a sense of
who is in line to succeed is important. Buyers will want to see that
And on a final note, if a sale of the business is being considered,
certain buyers will be 'strategic' or special purchasers. Identifying
and quantifying the benefits they could gain from the acquisition of
your business will better inform the negotiations and potentially mean
more money in the final transaction.
"Making sure a business is adequately prepared increases an owner's
chances of getting the maximum value out during this market
resurgence," concluded Ms. Loomer. "Recruiting the appropriate
professionals, such as business valuators, lawyers, accountants and tax
specialists, can make this journey more manageable."
The Canadian Institute of Chartered Business Valuators is the largest
professional valuation organization in Canada, and is the sole
administrator of the Chartered Business Valuator designation, providing
education and accreditation to its members. Chartered Business
Valuators are the only professionals in Canada specifically trained to
value privately held businesses and intangible assets.
CICBV was founded in 1971 and is headquartered in Toronto with Board
representation from across Canada. The CICBV oversees the
qualification, certification, continuing education, ethical,
professional and discipline standards of CBVs.
Editor's Note: More information can be found in a series of video
reports from CICBV that offer insights from Chartered Business
Valuators across Canada. The reports focus on building value in a business, the role of business valuators, market conditions, and legal disputes in business.
SOURCE: The Canadian Institute of Chartered Business Valuators
For further information:
Megan Kennedy, The Canadian Institute of Chartered Business Valuators
416-977-1117 x 228 firstname.lastname@example.org
Kate Rapson, Tenzing Communications
416-367-1557 x 105 email@example.com