By Ronnie Evans
If you’ve been paying attention to news headlines lately, you’ve probably noticed an uptick in merger and acquisition activity. Companies in the workboat industry are buying, selling and consolidating more aggressively than I’ve seen at any point during my career.
This is good news for buyers and sellers, but as M&A activity increases, so too does the complexity of selling a company. Deals that used to be done over a phone call and a handshake have become more sophisticated with the increased interest from the private equity community and the continued expansion of maritime strategic companies.
With interest rates low, an aging workforce and increasing interest from possible buyers, you may ask if now is the right time to sell. This is a big decision. Take the time to think through the details and find the right advisors, and carefully consider the following:
1. Personal objectives — It’s important to weigh your personal goals. Are interested in retiring, or would you like to keep working? Does it make sense to select a family member to run the company as you transition out of day-to-day activities? Are you looking for financial diversification?
2. Company financial performance — Buyers prefer companies that have had consistent financial performance over the past several years. Also, be sure to have an explanation for any inconsistencies in financial performance.
3. Business outlook — Those interested in purchasing your company will do so to take advantage of future growth and revenue. Do you have stable customers and contracts in place? Can you demonstrate that there are a healthy number of new business opportunities to pursue?
4. Quality and depth of management team — As you prepare to sell, it’s important that all of the company’s key relationships don't revolve around you. Can the business can run well without you? Do you have the right team in place to take the company to the next level? It’s OK to have some holes in the leadership team, but transparency is important.
5. Macroeconomic trends — Keep an eye on trends in the larger business environment that may impact the value of your company. Low interest rates are driving buyer activity to some extent. At the same time, if the price of oil has effected your business, you may see a lower valuation.
6. Company financial statements — Buyers prefer to see audited financial statements. Reviewed financial statements are less desirable, but can be acceptable.
7. Capital investment projects — Don't neglect capital expenditures just because you’re thinking of selling your company. Make investments with long-term ownership in mind, knowing that deferred investment will affect valuation.
8. Assembling the team — The intricacies of a sale can be complicated, and large companies typically need a deep bench of professional advisors. Consider coordinating with legal, accounting, and investment banking advisors to optimize the structure and process.
This list is just the tip of the iceberg when it comes to selling a business, but thinking these questions through will put you on the right path toward a successful and rewarding transaction.
---
Ronnie Evans is Director of Marine Finance at Key Equipment Finance, the equipment finance affiliate of KeyBank. He has more than 20 years of experience in the finance industry. Email him.
The views and opinions expressed in this blog are the author's and not necessarily those of WorkBoat.
