Articles > A Visionary Leadership Team Adds Value to the Sale of Your Company
A Visionary Leadership Team Adds Value to the Sale of Your Company
By Kathleen Smarilli, M&AMI, President and CEO Smarilli Strategic Partners
According to a 2019 Deloitte Private global family business survey fewer than 30% of multiple generation family-owned businesses survive beyond the third generation, even though longevity is a common legacy goal.
Why?
Against the backdrop of unprecedented circumstances created by a global pandemic along with societal, cultural and political unrest across the U.S., a solid business foundation and visionary leadership team can position a company for investment, transfer, merger or acquisition.
Clear conversations. Defining market strengths. Understanding the marketplace. Understanding your role in the marketplace. Developing or showcasing a strong leadership team translates asset value to potential buyers, or business investors in your company.
While technology and virtual access to one another has underpinned most of 2020 in a way never before imagined, that same connectedness can provide a springboard to reach a broader audience – prospective clients, employees, investors or potential business merger, acquisition or succession buyers.
The following examples of real transactions illustrate several ways buyers are likely to focus on the quality of the seller’s leadership team during the sale process.
Talking, Talking, and More Talking
One buyer had many ‘heart-to-heart’ conversations with the seller about the talent of the seller’s leadership team throughout the transaction process. The buyer was eager to know as much as possible about each individual. Having ‘best-in-class’ seasoned management was important to the buyer long term.
Assessing Commitment
Another buyer’s CEO ‘interviewed’ the seller’s leadership team immediately prior to finalizing the negotiation of the purchase agreement, focusing on the team’s skill base and commitment. While this process can make some team members nervous, others welcome this discussion so they can put their fears about their role in the new company to rest.
Dotting the “i”s and Crossing the “t”s
Many buyers perform background checks prior to finalizing employment agreements with a leadership team. While management background checks may surface issues that neither buyer nor seller anticipate, catching those issues before close will ensure a smooth transition into the next phase of the company.
Getting Everyone on the Same Page
Some buyers are laser focused on the integration of the acquired firm into their organization. They may hire a consultant to lead the process to make sure the leadership team is ‘on the same page’ from the day the sale is finalized. Proactive communication throughout the process by the buyer’s and the seller’s leadership teams will keep everyone focused on growing the business.
Creating, developing and retaining a strong leadership team safeguards the transfer of value to the buyer and ensures a competitive multiple for the seller. It can also help ensure the seller’s key leaders are still with the acquired company far into the future. Most importantly, it is more likely to guarantee a win-win outcome for both buyer and seller.
An important value driver for business leaders when considering a sale is whether they have developed a solid leadership team that will effectively transfer value to a buyer. A professional leadership team is attractive to professional investors, which means larger, more sophisticated buyers, and a broader array of potential buyers.
There are many other key value drivers—the seller’s market opportunity and competitive advantage, along with the industry’s health; financial strength and controls; sustainable revenue streams and customer diversification; and vendor relationships and proprietary technology.
The number one question from our buyers is: “Who is on the leadership team that will run the company and continue to create value after the owner is gone?” No matter the size of the company, the buyer needs to see a strong management team that will be able to effectively maintain and grow the earnings stream of the company into the future.
For More Information Contact:
Katie Smarilli, President and CEO
Smarilli Strategic Partners
717-319-3711