How a company can prepare to enter the market for a potential merger or acquisition

Navigating the merger and acquisition process can be complex and difficult—especially for owners of small and mid-sized transportation companies who have never sold a business before.

“When you get into the thick of a deal, sometimes things get a little murky,” Keith Klein, president and CEO of KKlein Ventures, said in a webinar. “It’s good to have good people who support you, but they’re also willing to tell you when you’re wrong and need to stop and think about things.”

Industry experts like Klein shared their tips for successfully navigating the M&A process in a recent Spark Change Lab webinar. As you juggle the complexities of an acquisition, keep these tips in mind:

Research, learn, prepare

Often, the world of mergers and acquisitions is a completely new area for business owners. They will have to learn countless new processes and rely on the knowledge of those more familiar with this new world.

Consult with advisors

The right advisors can make all the difference. Rebecca White, EVP of Strategy and Corporate Development at Kenan Advantage Group, recommends consulting with an advisor to get an accurate valuation. That way, when an owner goes to market, they know what to expect.

“Consulting with an advisor who can help you establish a baseline before you go to market, what your business is worth and how buyers will perceive its value, is really important,” White said. “If you work with an advisor who focuses on the transportation logistics space, they’ll have relationships with buyers in the market and will have better knowledge that will apply to your business as you go through the sale process.”

Klein agreed, emphasizing that good advisors must have both the necessary experience and the respect of the business owner.

“Make sure you have the right advisors,” Klein said. “It’s not your drinking buddies; it’s a group of people who have been through this process from different angles — whether it’s accountants, lawyers — but also people you trust and respect, so they’re not afraid to tell you when you’re high.”

Find buyers who will close the deal

Business owners should also look at the buyer pool and identify the types of buyers that would be most attractive. One key characteristic is whether the potential buyer is willing and able to go through the acquisition process.

“You have to make sure the buyer has the ability to execute the transaction,” said Kevin Burch, vice president of government relations and sales for Martin Transportation Systems.

See also: Analysis: Mergers and Acquisitions – Outlook for 2024

Start planning your acquisition process

Owners may not realize the time, energy, and process involved in the acquisition process. It’s important to figure out what needs to be done well in advance, from compiling documentation to building a team of experts.

Prepare for urgency

One of the key factors in maximizing the value of a business is good documentation and financials. Accurate accounting, if not prepared in advance, can take a lot of time and effort to get started.

“Start gathering due diligence data,” White said. “This process is very time-consuming because buyers want to quickly get a handle on the business and understand the potential risks involved. It’s hard to necessarily gather all that information while you’re still running the business.”

White recommends working with your advisors to understand and prepare for any informational needs, including legal documents, asset titles, stock certificates or customer agreements. Having this information at the ready can reduce the burden of the acquisition process.

“When a buyer starts digging from a due diligence perspective, they’re able to move more quickly,” White said. “It’s not as much of a burden on the company, and you can keep focusing on running your business.”

Current financial information

Owners should ensure they have a strong finance team to produce timely financial reports.

“It’s critical to make sure your financials are in order,” Klein said. “You’re going to undervalue and undervalue your business if you have poor financials because the buyer won’t trust the numbers. You need the buyer to trust the numbers, and your advisors need to have a thorough understanding of how the business works to determine how to get the maximum value.”

“If you don’t know how your business did last month, 10 days after the end of the previous month, that’s not the right approach,” Klein said.

Find your sales priorities

Selling a business involves several competing interests that the owner must consider and prioritize. The interests of employees, family members, stakeholders, and buyers will often conflict. The business owner must prioritize what is important to them.

“Think about your priorities. What’s important to you?” Klein asked. “If two are going to compete, which one comes first? Is it maximizing profitability or selling price—or, if you have a buyer who wants to consolidate all of their operations in another city, is your community important to you?”

Start talking to your stakeholders

Everyone involved in an acquisition has a vested interest in the outcome. Owners should ensure that the right people are involved at the right time to achieve the desired results.

Find experts for key roles

Taking over a business requires several employees and advisors from both the buyer and seller. For an owner selling their business, it is important to have the right experts.

“The first ones that come to mind are (they’re) your M&A attorney, probably your tax attorney, your wealth advisor in this transaction, your investment bank,” said Meghan Meurer, CCO at The Tenney Group. “If you have equipment, someone to value your equipment (and) potentially real estate if it’s a real estate asset.”

See also: US Logistics Solutions files for bankruptcy after lender suddenly withdraws financing

Meet buyers in person

Face-to-face meetings with potential buyers are an ideal way to collaborate effectively and find compatible workplace cultures.

“We’ve always had great success when we can physically bring buyers and sellers together in the same room, have a meal together and get to know each other,” Meurer said. “That always helps.”

Find the right way to communicate

When employees hear they are about to be acquired, they may feel understandably nervous about the risks inherent in acquisitions. Effective and timely communication will prepare the selling business for the process, laying the groundwork for a successful transformation.

“You have to communicate,” Burch said. “It’s very difficult to figure out, ‘When do you say this? How do you say this?’ You don’t want the whole company to suddenly disappear and then the buyer has another suggestion that maybe (the company) isn’t worth that much.”

The company will need to determine when to inform which stakeholders and when key information can be responsibly disclosed. It can help to include some teams in the acquisition process so they can prepare the company.

“It’s important to make sure that all parties that are going to be involved and impacted are included in those discussions,” White emphasized. “A lot of this is going to happen after closing, but to the extent that there’s work that can be done before closing, if people are involved and aware of the transaction, it’s certainly helpful to discuss it up front so that everyone is comfortable with the plan as we go through closing.”

When information can be shared, effective communication reaches all stakeholders, including employees at every level of the organization.

“There are definitely things that you have to hold close, but you have to be smart about it,” Burch said. “If you really care about your culture and you really care about the whole transaction, you have to communicate all the way from senior management to middle management all the way to the store.”

Be patient

The acquisition process can be a lot of work over a long period of time. The owner has to take a long time away from the organization to work with advisors, meet with buyers and get the deal done.

To ensure that a business can thrive without the owner’s full attention, patient, thorough, and timely preparation is essential.

“Start early,” Klein said. “If you think you’re going to have to leave in two years, it’s not too early to start the process.”