Selling your private company? Know and realize its true value

After building your business for many years, the moment will come when it’s time to retire. This is the scenario facing thousands of private company leaders across Canada. It’s an exciting and often bittersweet experience—but long before it happens, you should be planning your business exit and preparing for your eventual sale.

There are no do-overs when it comes to selling your business. There is only one chance to maximize deal value, and there are multiple factors to consider. These include mapping out your objectives, having a complete view of your assets, knowing your baseline valuations and identifying the right time to sell.

Be proactive in planning for your sale, and start as soon as possible

The best sales take time: the planning process should start at least five years before you want to make a deal. Lay out your objectives, devise a formal value creation methodology, prepare your growth path and start getting your business sale-ready. It's important to not overlook important other drivers of value such as optimizing your tax and legal structures; optimum returns will be harder to realize if you leave things to the last minute.

Globally, 84% of sellers believe that they could have done a better job promoting their business to potential dealmakers. Get a head start with sell-side due diligence—it’s a good idea to think like a buyer and anticipate their needs and concerns well in advance.

An important thing to remember is that this should be an ongoing process. Regularly take a step back and look at your long-term plan. Are you where you hoped you’d be at this stage? Have you reached your goals in terms of revenue, profitability, product and geographical reach? The sooner you set these targets, the more likely you’ll meet them, which means you’ll be able to maximize deal value when the best opportunity presents itself.

Too much confidence—or too little—can hurt your deal

Many business leaders believe that they have an intuitive sense of what their business is worth based on year-over-year metrics but one would be surprised at how many unwelcome elements can surface from and in-depth assessment in the lead-up to the sale.

There are also business owners who believe getting a complete valuation on their company will be a complex or disheartening affair, but that does not have to be the case. Having a full view of all the facts can only help, showing what you’re doing well and what you need to do better.

Other business owners have relied on seemingly comparable multiples to assess the value of their business. However, too many variables are in play—there are different products/services and business models, and market conditions constantly influence price and demand—and it’s never safe to make assumptions.

Step back and have a complete view of your baseline valuation

Before making a decision, you need to know yourself. Every aspect of your business needs to be examined—from your client base, to your employee headcount, to your financial performance. Oftentimes, it helps to have an objective third-party advisor take stock of your situation.

In some respects, selling a business is like selling a home. With a property, you can make renovations and the necessary repairs before you put in on the market. With a business, you can identify problematic areas and improve them to realize increased value.

For example, if your manufacturing company has encountered production issues, you need to resolve them—and then wait at least a full cycle, or even a full year, before you start courting potential buyers. By not doing so, the issues will raise red flags during the due diligence process and could have a detrimental impact on your deal prospects and value.

If you have embarked on any initiatives that haven’t been fully executed, make sure you have the talent and strategy in place so that the buyer can execute on them effectively. They’ll want to see the potential forward momentum of your company, and they’ll expect a concrete plan and a skilled management team to help execute on it.

Working with an external expert can also help you discover opportunities you didn’t know existed. For example, you may realize that it makes more sense to sell portions of your business to different buyers, each of whom place a higher value on a single division rather than the whole. In our global M&A study, we talked to sellers who derived significant value from their latest divestments: 92% of them had done their sell-side due diligence first.

You might be ready to sell, but is this the right time for your market?

Market timing is critical. It’s one of the main reasons why planning and preparing is so important. Keep a close watch on the markets that your company plays in, and assess your strategic position in them. Are you alone, or do you have multiple competitors—and if there are other players in the same space, what differentiates you?

Beyond that, you’ll need to keep an eye on the macroeconomic trends here in Québec, in Canada and abroad. When markets are strong, potential buyers are plentiful, and valuations are high, if you are sale-ready, you can act decisively to make the best deal.

Communicate with family, colleagues, and clients

Carefully consider the effect your business exit will have on your executives, customers and employees. Start with key stakeholders and shareholders, and bring them on board with your decision to sell. For some business owners, that may include family members whose support is critical to a strong deal. Reassure them that the sale is the right move, and make it clear why.

Communicate that same message to your senior managers, and when the appropriate time comes, be transparent with the whole company. Globally, 89% of sellers say that they could have driven increased deal value if they had worked more closely with their management team and key value-creating talent. Ask yourself: how can you collaborate with your senior managers and incentivize talent to maximize the value of your business?

I can’t say it enough: when it comes to your sale, timing is everything. Start planning early, keep your eye on market trends and know when it’s time to start a conversation with your stakeholders. It makes for a longer process, but one that will enable you to maximize deal value so that the business you built can be sold for what its worth.

Canada’s private and family businesses are in a period of significant transition, and it’s important that we get this right. For more information on this pivotal moment—and advice on how to seize it—see our Once in a Lifetime assets here, and reach out to PwC’s Private Company Services team.


Contact us

Miriam Pozza

Miriam Pozza

Partner, Deals, Transaction Services Global and Canada Deals, ESG Leader, PwC Canada

Tel: +1 514 205 5286

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