Owners and operators who take into consideration the main criteria buyers use in assessing an acquisition consistently achieve more favorable outcomes, according to Jonathan Skelly in Value Drivers in Distribution. When an owner is ready to sell, he should use a buyer’s guidelines to determine if his business is an attractive acquisition target or in deciding where to make improvements.
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Financial performance is one of the more obvious criteria potential buyers use. Skelly writes that acquirers focus on several financial benchmarks to determine an acquisition’s attractiveness, including gross margin, operating margin and growth performance.
Buyers also look at market factors, company-specific risks and growth potential, as well as synergies and integration.
Skelly also says key value drivers in distribution such as product plans and vendor alignment are considered when deciding whether to buy a company.
To prepare for the sale, develop a reasonable rationale for selling, clean up the company’s financials, and examine operating performance. Tie up loose ends and prepare for due diligence. Do you have a solid strategic plan? If not, this is another critical piece.
Read more tips in Value Drivers in Distribution.