M&A Readiness Check
Why perform an investment readiness assessment prior to selling? Buyers shy away from investing in businesses because of the high perceived risk, and secondly because they are only able to interrogate the past, and in reality, they are buying into the future, and if that future has been explored and fully valued, it makes it possible to enter into negotiations with confidence with the majority of their questions answered and high level diligence done.
Sellers are keen to know whether they assessed their own selling price correctly, and want to go to market knowing that they are not underpricing or over charging. Both of those possibilities can have serious consequences in the probability of selling. Knowing the investment readiness level of the business makes it possible to postpone and optimize for later sale, or go to market with a full back-up of their price and value offer.
In a nutshell, investment readiness covers the following aspects:
• Current organizational structure.
• Current business model.
• Products and services.
• Leadership and ownership structures.
• Market positioning and general marketing.
• Sales performance.
• Financial performance.
• Human resources management.
• Broad competitor analysis.
• Other micro elements.
Market and distribution channels.
Product and brand.
Cost of capital.
Complexity of business.
Customer profile and customer base.
Size of business.
Government regulations and restrictions.
Your Level of investment readiness can broadly be categorized in 4 levels
We have devised a system of rating readiness from the A grade to the fixer upper and a few grades in between. The whole approach is based on the process of providing the value that serious buyers and sellers have always needed from their business acquisition or sale team partner
• Broadly speaking the scale is as follows:
– Level 1 : Largely in line with the various tests and potentially non-owner managed.
– Level 2 : Largely in line with the various tests, but must be owner managed.
– Level 3 : Somewhat lacking in “investment rating” but gaps are identified for improvement.
– Level 4: Serious gaps exist, barely passing the going concern test-asset value sale potential