Preparing For A Sale - Business Strategy

By: Carty Davis
Published: September 10th, 2019

Preparation is an important part of any business pre-sale planning, whether you are selling part or all of your business. To begin, owners and key stakeholders must decide and align on a business strategy. Then, owners must make sure they are prepared for a sale and the challenges that may accompany it. Finally, no matter how well-planned any exit strategy may be, it all comes down to execution.

Carty Davis, a boutique investment bank partner who has completed hundreds of transactions in the multi-unit franchise and restaurant space, writes that preparing for a sale means aligning strategy, getting the financial house in order, and developing a plan for execution.

Here's what he says about the business strategy component:

Business strategy. When it comes to business strategy, owners must first understand the goals of the key stakeholders. Start with those end goals in mind and work backward. Depending on the capital structure, there are many different variables that will determine the steps needed to maximize returns. Among the critically important subjects to address are:

• Will the sale be a full or a partial liquidity event?
• Is the buyer a related party or will it be a sale to an outside, third-party group?
• Is the operator selling, retiring, and moving on or do they have flexibility or a desire to stay with the business in some capacity?
• Which is more advantageous, an asset sale or a stock sale?
• Understand what is being sold and set expectations. Is the sale opportunity for a limited number of units in a small market, or is it an emerging brand with potential and upside?
• Is the owner seeking a partial liquidity event that likely includes new lending partners and/or outside investors?
• If there is owned real estate, should it be included as part of a sale? Are there opportunities to create value by exercising purchase options on leased sites? Should this be completed before the process starts?

Before approaching the market, every franchise business should be asking these questions, having internal discussions, and aligning on strategy.

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