In a Sale, Timing is Everything
In a Sale, Timing is Everything
You know that old adage, timing is everything? When it comes to selling your company to a strategic partner, that overplayed truism cannot be played enough. So what are the key factors going into timing when taking your company to market?
First, general market timing. The bottom line is that your company is worth as much as a buyer is willing to pay for it. If the market is hot, that’s good, because it means buyers have more money on hand for deals. That’s the case right now, with strong public markets and strong cash reserves in the hands of strategic buyers and, even more so, private equity. This is why, broadly speaking, right now is best time to sell a market in over a decade. That said, we’re currently in the third longest bull market since WWII, and nothing lasts forever.
Second, sector timing. If the market is hot, that’s good, and if your sector is even hotter, that’s even better. A buyer is more comfortable forgiving a lot of things, including being an early stage startup, if you are positioned well in a growing market. However, if you find yourself on the other side of the timing equation, you may find buyers digging deeper into your financials, and having slow and lackluster responses to your persistent inquiries.
The third aspect of timing is one that’s often overlooked—geopolitical timing. Even outside of sectors, like energy, that are intimately tied to world affairs, geopolitical changes can have a profound impact on M&A across markets. Flight of capital, political turmoil and unfavorable transaction conditions may improve or deteriorate over time in local and international markets. Russia’s conflict with Ukraine stopped an untold number of deals cold, and not only in those countries. It could have caused me significant problems personally if it had happened when I sold my Seattle-based company in 2011—my main development office was in St. Petersburg. I would not be able to sell today given the current complicated geopolitical issues in the region. So, keep one eye on your company and another on where you do business and what that could mean to a potential acquirer. Since so many deals are cross-border—including 60% of all acquisitions that we broker, this is an important consideration.
Personal factors also come into play. Retirement, health problems, family changes—any of these can create a situation where the sale of the company is in your best interest. At the same time, these incidents—as well as things like founder conflicts, litigation, investor issues—can also make a company unsellable, depending on the specifics. This is one reason that waiting too long to sell can be a very expensive mistake.
Keeping all of this in mind, there’s one final, overriding factor to consider above all others when you’re trying to determine the best time to sell your company: you should sell your company when things are going well. What does “going well” mean? That metric depends on what “well” means for your company – it’s the metric of success that will make buyers take notice of what you are doing. Are there millions of users using your app, with strong retention and viral growth? Are you signing up enterprise customers faster than you can onboard them? Have you reached a goal in top line revenue or profitability and are you in a breakout scenario?
Across markets, solid growth, happy customers, happy channel partners, and some of the latter two poking around to discuss “strategic options” are good indicators of success. That’s the time to think about running a competitive process to maximize the value you’ve created.
By Daniel Bernstein