If you are planning to sell a business or major asset what can you do to increase its valuation or perceived value?
Here is a list of eight ideas in no particular order of importance.
The hyperlinks are to writing on those subjects elsewhere on the Dilanchian website, either in the Library section or in the Lightbulb blog.
- Improve revenue
- Improve operating margins
- Productivity
- Net profit
- Price earnings multiple
- EBIT (earnings before interest and tax) multiples
- Improve assets (eg intellectual property) and make the business sustainable
- Methodologies (a secret “factor X”)
- Templates (eg stationery, forms, procedure docs)
- Business systems (eg workflow, accounts)
- Clean up exposure to risks and liabilities, including management, commercial, and legal risks
- Document informal arrangements, eg turn them into contracts
- Review existence and adequacy of insurance policies
- Bring tax and company regulatory compliance up to date
- Collaborate with others and work towards “open innovation“
- Re-align with industry leaders in “industries” with higher valuation multiples
- Develop your strategy, eg your commercialisation strategy
- Seek two or more buyers to gain from price competition or auctions between them
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Business lawyers talk about law, too much. It leaves the impression that business lawyers don’t have an understanding about things outside law or an ability to integrate legal and non-legal strategy. A consequence is that too often clients call their lawyer too late. This can reduce the value of legal work.
In the context of major business or asset sale or licensing transactions it is usually sensible to call a business lawyer before negotiating the heads of agreement or deal points. Call when a transaction is at merely a concept stage. More is typically “won”, including in dollar terms, during early stage negotiations than later.
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