Preparation mistakes

Preparation mistakes

 

Following are the common mistakes while preparing for sale

Impatient and Hasty Decision: Sometimes the sellers are so keen on selling their business that they take hasty decisions which might prove wrong. It is important to carefully consider the pros and cons of selling a business before taking this critical decision as it could have myriad ramifications for the business owner.

Lack of Customer Information: Customers are the lifeline of any business. A buyer’s biggest fear when buying a new business is that might lose the loyalty of the customer when there is change in the management. A lack of details about the strong customers of the company like their buying pattern etc could put off the buyer. So when selling a company a detailed list of the customers, their contract details and their past transactional details should be provided.

Incorrect Timing: If the key employees, vendors, or customers get to know of sale early in the process then it may happen that the key people associated with the organization abandon their relationship in anticipation of fear from the unknown. Therefore the acquiring firm must make sure of “Who knows What When”.

Lack of Staff Training: Inadequately trained staff could also ruin the chances of selling a business. A buyer always looks at the stall ability to increase the value of the business.

Hide the Weaknesses: Every company has some weakness and it is useless to hide these from the buyer. If the company hides its weakness from the buyer, it makes the buyer feel that the company has no confidence in itself and hence could lead to the buyer offering a lower price.

Risk of minority shareholders: Any minority shareholder could hold up the deal if the seller company doesn’t have agreements in place that force them to accept terms agreed to buy the controlling shareholders. This is because buyers almost always want to buy 100% of the outstanding stock.

Poorly Maintained Assets: Though the value of a business is determined by its future cash flow but the condition of its assets is also an important factor. So if the business assets are not properly maintained it could affect the sale of the company.

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