Gabriela Rodil has seen far too many business transactions fall apart at the last minute to make assumptions before a deal is closed.
“They underestimate what it's really going to take to get it through the finish line,” says Rodil, founder and CEO at Gabriela Rodil & Co. “This often stems from a lack of resources. They are already there dealing with the day-to-day responsibilities of managing the business, thinking about the future, selling, processing — whatever it is that a company does. They often don't have the bandwidth or the management team to deal with a transaction on top of it.”
Rodil has been making deals for 20 years in different countries around the world, working for Flexan, Plante Moran, Heico, Spectrum Brands, Schlumberger and KPMG before striking out on her own.
Working primarily with small and middle-market companies, Rodil implores business owners to commit all their energy and available resources to an event that may only happen once in their lives. And just as importantly, see it through to the end.
Smart Business Dealmakers spoke with Rodil about best practices when putting your company on the market and the keys to optimizing its value.
Commit the right resources
When you’re looking to raise capital or sell part of your business, you need to understand that things are going to change with your business once a deal gets done.
“Understand what kind of strings will be attached,” Rodil says. “How much control will the investor providing capital want? What kind of rate of return will they need? Are they going to require covenants to be met or a specific type of financial reporting to be done? All that will change how the business is going to run afterward. It's really important to understand all the options, the differences between those options and what your business would look like with that kind of partnership or new owner.”
It can be a very eye-opening conversation for business owners who have always focused solely on running their companies. If that’s the case, it’s OK to ask for help.
“If what you're good at is running your business, keep running your business and find experts you can trust who can run this particular process that you're only going to do once,” Rodil says. “But often what happens is because of the lack of information, a lot of times I see business owners or management teams try to use the advisers that they have.”
If those advisers lack specific M&A experience, it can create a lot of headaches.
“There's a big difference between an attorney that helps a company with contracts and kind of the day-to-day happenings in a business versus an attorney that has experience with transactions,” Rodil says. “It's a very different skill set. And sometimes I see business owners just using whomever they're really comfortable with, people who don’t understand the complexity of a deal. Know what kind of talents you have in house and where you need to get some external helpers.”
Get your house in order
When it comes to optimizing the value of your company, there are two key areas to think about.
“You need to be able to explain your past performance and you need to substantiate whatever forecasts and projections you're presenting,” Rodil says. “A buyer or an investor will really want to know that you have been historically on top of things, that you know how your business has behaved and where the drivers are that have influenced past performance. Can they rely on the projections and forecasts you're presenting? They're buying or they're investing in the future of your business.”
You need to get your house in order and present a clear picture of what a potential buyer or investor is getting into.
“If there have been any ups and downs, you know what happened,” Rodil says. “You have your contracts in place. Anything that requires compliance has been addressed. Make sure all this is clear for the owners, for the management team and for everybody.”
In addition, be clear about your company's value proposition.
“What is the strategy? What do you bring to the marketplace?” Rodil says. “Companies will often say, ‘Well, we're just about making these widgets.’ Everybody says that. What is it about your widgets or about your process that is unique? What services do you provide? There has to be a story behind why you're valuable and why you would continue to be valuable in the marketplace.
“This is way too important of an event in the life of your business to hire the wrong advisers just because you think you're saving a little bit of money. At the end of the day, it could cost you hundreds of thousands, if not millions, in terms of what you're not going to get for your business and all the money you're going to leave on the table.”