Hiring the right kind of savvy can maximize sale of a business

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Few homeowners these days would try to sell their place without retaining professional help to prepare it and find a buyer. It’s even more crucial to find the right help in selling a business – someone who knows how to assemble the requisite documents, assess potential exit strategies and broker the best deal.

But how do you find such a paragon?

Plan way ahead

Opinions differ as to how long it takes to sell a business properly, but it’s likely to be measured in years, not months. According to Eric Gilboord, chief executive officer of Toronto-based WarrenBDC, a management and business-selling consultancy, some entrepreneurs are even planning now for a sale 10 or 15 years in the future.

Normally, though, most sellers will need three to five years from their first thoughts of retirement to inking the deal. “And then you’re likely to be working for the company for a few years,” Gilboord adds.

COVID-19 has lengthened the preparation time, says Damiano Peluso, Toronto-based partner in transaction services with KPMG Canada. He suggests bringing advisors on board about a year before the sales process begins. This provides sufficient time to put the documentation in place.

Before the pandemic, he says, the sales process, from identifying potential buyers to closing the deal, might have taken six to eight months. Today, it’s closer to seven to 12 months.

The money that you spend with the right advisors will come out more than twofold in any deal that you get.

Damiano Peluso, KPMG

His colleague Lorne Shillinger, KPMG tax partner and family office leader for the Greater Toronto Area, says that, given his focus on tax planning, he would prefer to start even earlier, since “if it’s a mature business, some of the rules require you to be methodical for two years in advance.”

For instance, he explains, Canadian tax regulations allow each owner of an owner-managed business a capital gains exemption of almost $990,000, and it’s important “to make sure the family takes advantage of that if they haven’t previously used it.”

Hire for the right skill set

Some businesses already have a tax accountant and corporate lawyer on call, but these experts may not be the best people for this specialized job.

Sellers will need help with financial, taxation, accounting and legal matters, Gilboord says, but “they need that advice from people who have experience selling businesses.”

Among other considerations, owners may need help understanding their options, such as whether to sell all or only a part of the business and its assets, and whether or how they will remain to help with the operation after the sale. In addition, Gilboord says, “there are going to be psychological issues that are as important as the financial issues,” not only for the founder but for other members of the family.

Apart from the right legal, tax and M&A experience, “there’s something to be said for hiring an advisor who has experience in your industry, who can pull out the value in that industry and understand who are the potential buyers,” says Shillinger. “It’s usually more skills than any one person has, and you need a team that works effectively together.”

It’s not an area where you want to start saving money, either, says Peluso. “The money that you spend with the right advisors will come out more than twofold in any deal that you get.”

One advisor describes his expertise as telling the seller’s story.

“We are storytellers, really,” says Robert Bezede, director of corporate finance with Norton McMullen Corporate Finance Inc. in Toronto, a boutique investment-banking firm that works primarily with private businesses. “We learn your story, distill that story into models and financials, and then tell that story to potential buyers.”

Look for compatibility

The person helping you sell your life’s work must be on your wavelength.

“Personality differences get really exposed later on in the process,” says Bezede. “If you’re off one degree on the first day, you’re off 10 degrees on the last day, so if you have different values or approaches, it becomes very, very painful.”

Gilboord says, “It’s like dating, to a certain extent; gut feeling is really important.” He adds that a spouse should typically meet the prospective hire early on.

Ask the right questions

Before even starting the hiring process, sellers need to ask themselves some tough questions, Gilboord says. Are they personally ready to make the transition? What are their objectives for the sale? Do they have a realistic idea of the company’s value?

“You also have to give some thought to what happens after you’ve sold the business,” Shillinger says. It’s not necessary to go into the process with all the answers, but since “you’ll be so busy over the next six months or year over the sale,” he suggests giving some thought to what comes after, and the impact of the sale on the family.

It’s normal to have a long list of questions for the potential broker, says KPMG’s Peluso. “Ask them what their industry experience is. How much work have they done with similar-sized companies in this industry?”

Experience working with families is also helpful, he says: “The most successful businesses are multigenerational, and this is their baby. They may not respond rationally at times.”

Bezede says that, when it comes to identifying a buyer, “some brokers are scattershot, some brokers are rifle.” A seller should find out ahead of time whether the approach will be focused, or discreet and one-to-one, or broadcast widely, which may have serious implications for the seller “if you’re sensitive about even one person finding out your business is for sale.”

Finally, a common mistake is for a relatively small seller to engage too big a broker, only to find themselves overlooked.

“You never want to be the biggest client, nor the smallest. You just want to be in the middle of the road,” Bezede says. “It’s the same amount of work whether you’re selling a million-dollar business or a ten-million-dollar business. You want to make sure you’re working with an advisor who plays in that pond.”

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