When an entrepreneur is thinking of selling or transferring his business to the succession, he usually has two main wishes: obtain the best possible price and ensure the transfer of a healthy business to the buyers.
This is why Raymond Chabot Grant Thornton experts guide the transferors in maximizing the attractiveness and value of the company’s shares, and to facilitate its transfer to new owners.
Sometimes known as business staging TM, this process optimizes the value of a business. It usually takes five to ten years to go through every stage of such a process. It is therefore a good idea to initiate the process as soon as the entrepreneur starts considering a sale or a transfer that will occur in the next few years.
A diagnosis of the business
Raymond Chabot Grant Thornton’s experts first meet the entrepreneur to discuss his objectives and the time at his disposal. Then they produce a diagnosis of the business. What are its internal strengths and weaknesses in terms of finance, management practices, operations and human resources? What are its external strengths and weaknesses, particularly in relation to its market positioning: is the business stagnant or in decline?
Thirdly, the experts establish a list of actions to make up for the company’s deficiencies and assess the relevance of each. Let’s take the example of a company that has to make up for a technological lag regarding its equipment. Will the purchase of new technologies increase the company’s value sufficiently so that the invested cost is worth the trouble? The time required to perform each action is also evaluated.
A concrete action plan
The entrepreneur and the experts then choose the actions to be performed and produce a concrete action plan, including the people responsible and the deadlines. Here are some examples of possible actions: install an accounting system to manage inventory, look for new distributors to increase sales, improve the organizational structure by giving more responsibilities to certain employees, documenting the processes and instituting policies and procedures in order to leave traces of the seller shareholder’s knowledge, etc.
In addition to increasing the company’s market value, the optimization process reduces the risks related to the contractor’s rushed departure, due to health problems, for example, and the risks related to “latent defects”, because there won’t be any more. It is also very reassuring for the seller to know that he is handing over a healthy business that has every chance of survival (whether to his children, employees or a third party).
A business makeover
While the optimization process may sometimes seem long, it is worth it. Often the transaction will happen faster because of the process. A healthy business attracts more potential buyers and the buyers’ requests for financing are accepted more easily.
Raymond Chabot Grant Thornton’s experts give the business a real “makeover”, for the greater benefit of the seller or transferor… and the buyer.
TM Fasken Martineau
19 Feb 2014 | Written by :