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Bring your future into focus
In the best of times, selling or divesting part of a business can be an emotional and financial rollercoaster. But in a world where uncertainty is the new normal, this process is complicated by volatile market trends, valuations and buyer motivations. What’s more, many businesses may be seeing signs of stress, whether it’s general in their market or unique to their organization.
To maximize deal value and deal objectives, how you position yourself is critical for success. It’s important to tread carefully and take the time to plan, strategize and put your best foot forward. Be proactive when making decisions while also being flexible to adapt to rapidly changing market conditions.
So how do you decide whether to fix, sell or divest part of the business?
Make the right move at the right time
For the best results, it’s best to give yourself enough time to prepare prior to going to market. But this isn’t always possible, so it’s important to understand what pressures you’re facing and plan as soon as possible.
Where are you on the distressed continuum?
- Operational disruption
- Financial stress
- Liquidity crisis
- Insolvency
Operational disruption
- Loss of key customers and reduced demand
- Supply chain disruptions
- Loss of key employees and increased turnover
- Temporary closures and social distancing measures
- Risk to foreign operations with tariff and regulatory changes
Management actions
Reinvent
- Reassess strategic position and business model
- Divestment of non-core assets
- Innovation and technology
- Reevaluate capital structure
Financial stress
- Liquidity issues (overdraft, stretched payables, etc.)
- Breach of covenants included in financing agreement
- Lenders, stakeholders or banks issue forbearance agreement
- Significant loss in shareholder value (e.g. fall in stock price)
Management actions
Redesign
- Evaluate segment profitability
- Begin process optimization and transformation
- Negotiate with lenders
- Benchmark business and evaluate fit for growth
Liquidity crisis
- Permanent closure of business segments
- Prolonged reduction in spending
- Fundamental changes in consumer behaviour
- Significant debt due
- Urgent sale of assets to fund operations
Management actions
Remediate
- Short-term cash-flow management (13 weeks)
- Operational restructuring
- Government support (i.e. subsidies)
- Capital injection
- Stakeholder communications.
Insolvency
- Inability to make payments
- Equity holders lose control
- Capital injection required
- Informal closure
- Formal closure
- Liquidation/asset sale
- Significant loss in debt-holder value
Management actions
Restructure
- Develop and execute restructuring plan
- Seek potential buyers
- Support liquidation/asset sale process
- Asset valuation
Navigating toward a successful sale
Selling or divesting a business requires careful planning and thoughtful execution. For both public and private organizations, it’s an opportunity to look ahead and create a path to value. But the process can be high-stakes, emotional and fraught with financial uncertainty. No matter your situation, it’s worth putting in the time and resources to get it right and achieve all of your objectives.
Explore the deal journey
Assess the implications of any sale from any point in the deal spectrum—from sale readiness to deal execution and post-separation transition.
Understand your worth
- In order to make informed decisions, you’ll need to know your company’s market value range. That’s why it’s important to establish a baseline valuation with the help of a professional.
Never rush to market
- For the best results, allow adequate time to properly prepare prior to going to market. Once your plans are laid out, you want to be ready to move quickly on the best opportunities since the M&A market can change rapidly.
Find the right buyer
- Finding the right buyer is only possible when you have thoroughly considered your various personal and business objectives, from liquidity and sale price to employee concerns.
Put some plans in motion
- Take a step back and look at your business from a buyers’ perspective. Are there plans in place to execute on your new initiatives, and what are your ideas, prospects and strategies around growth and innovation?
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