Selling a company does not begin when potential buyers are contacted. In most cases, it begins much earlier.
A company may be profitable, hold a relevant market position and have strong growth prospects, yet still lose value during a sale process. Not because the business is worse than it appeared, but because it was not ready to be analysed by an investor.
This is an important distinction. A good company is not necessarily a company that is ready to be sold.
When an investor considers an acquisition, they do not look only at the previous year's EBITDA. They seek to understand the quality of those earnings, how recurring they are and, above all, whether the company can continue to create value after the current shareholders leave.
This is where many of the questions begin: how much of the business depends directly on the founder? Is there a second tier of management? Is the customer base sufficiently diversified? Are the principal contracts properly documented? Are there related-party arrangements that should be normalised? Does the financial information make it possible to understand quickly how the company and its different business areas have evolved?
The greater the uncertainty, the larger the discount a buyer is likely to apply.
Preparing a company for sale therefore means, first and foremost, reducing uncertainty.
One of the first areas to address is the quality of financial information. Well-organised accounts and consistent reporting do more than facilitate due diligence. They make it possible to explain the company's performance properly, identify EBITDA adjustments and distinguish structural results from exceptional items.
Dependence on the shareholders is another critical dimension. A company in which all commercial relationships, operational decisions and business knowledge remain concentrated in one person presents an obvious risk to a buyer. Building autonomous teams and clear processes can therefore have a direct impact on perceived value.
Customer and supplier concentration, intellectual property, employment contracts, future capital expenditure, working-capital requirements and potential tax or legal contingencies must also be considered.
Preparing a sale is not only about eliminating weaknesses. It is also about knowing how to tell the right story.
Why has the company grown? Where are the future opportunities? Which markets can it develop? What investments have already been made? What synergies could a strategic buyer capture? Is there scope for consolidation in the sector?
Two businesses with similar financial results may justify very different valuations if one presents a clearer growth outlook, lower risk and greater scalability.
There is another variable that is often underestimated: the sale process itself.
A bilateral negotiation with a single interested party creates a very different dynamic from a structured process in which several potential investors are approached at the same time. Preparing the right materials, identifying the right buyers, controlling when information is disclosed and preserving competition throughout the process can be just as important as the final price negotiation.
An owner considering a sale in two or three years is not necessarily making the decision too early. They may simply be creating better conditions in which to make it.
At Fenix Capital Partners, we believe that an M&A transaction begins before the transaction itself. It begins when shareholders start to view the company through the eyes of someone who may one day want to acquire it, and that change in perspective can, in itself, create value.