(2 December, 2004) Why do deals succeed?

Develop a strategy: Develop a plan about how to sell the business, when it will take place and for how much, as well as how the business will go to market and what assistance will be required.

Preparation: The seller should create a “virtual data room” containing the following: financial data, client segmentation and service matrix, organisational charts with job descriptions, compliance reports, complaints register, funds under management analysis, business plans, office manual, licence/s, marketing material, lists of referral sources and a new business activity summary. The buyer needs to have sourced finance, assemble compliance, accounting and negotiation personnel and be able to articulate the “value proposition above cheque book”.

Realistic expectations: The seller needs to have an independent valuation of the business and the seller and buyer need to consider the length of the transition period after the sale.

Business as usual: Both parties need to ensure business continuity and sellers should not “emotionally retire” at the signing of contracts if outstanding payments are determined by performance after 12 months. Both parties also need to set communication strategies to staff for before and after the transition and tackle any uncertainty while presenting a clear future vision from the buyer and seller.

Risk analysis: Confidentiality agreements need to be signed and due diligence carried out at the earliest possible stage. The future entitlement to the ongoing revenue is what is usually being bought or sold so there must be a high degree of integrity and confidence attached to the financials.

Negotiable/ non negotiable items: Establish what the bottom line really is surrounding issues such as personnel, timing, future roles and price. Create an inventory of non negotiable items to ensure you do not enter negotiations with the wrong party.

Timeframes: A purchase or sale should be managed like any other important project. Timeframes should be created and monitored and all parties should agree to them. The more protracted the negotiations, the less likely a transaction will be satisfactorily concluded.

Legal advice at the conclusion: Legal advice is essential, however should not be sought until negotiations have concluded. Allowing lawyers to influence the intent of an agreement will significantly increase the chance of failure.

Future vision: “Seller remorse” is natural given the significant changes planned but can be avoided if there is confidence in the purchaser and the seller has planned for the next phase of their life. The buyer should recognise this will be one of the greatest challenges of their career.

Project management: Project management will offset any concerns about the scale of work to be done if broken down to digestible pieces. Communication, time management and adequate resourcing are essential.

Seek professional advice: A business adviser should specialise in their field and be able to work with staff, dealer group, due diligence teams and other professional advisers. Their appointment should increase the likelihood of success and fees, references, processes employed and timeframes should be discussed prior to appointment.