SupplySide Group Founder, Chairman and CEO Ansir Junaid has bought and sold multiple companies. At last year's Cleveland Smart Business Dealmakers Conference, he talked about the importance of keeping a business ready to sell, how to maximize value in the transaction, and the importance of keeping emotions in check.
Something sellers should keep in mind as they approach a transaction is understand what each possible exit path might mean — for the business, for the team, and for them.
"The most important thing, which I missed when I exited a few companies early on, 15-20 years ago, is that I needed to figure out what the path is," Junaid says. "Is it the private equity path? Is it a strategic partner who I'm going to sell to? Am I going to have them come in as a minority partner if I'm selling it to a PE firm? Am I going to let go of all the control? Because if you're talking about a strategic partner, you almost have to, for example, think about some of the management overlap."
He says in one business that he held for a couple decades, he didn't want to relinquish management responsibilities — he wanted his management to run the business. When private equity was on the other side of the table in one deal, he says it was hard to overcome his emotional attachment to the company. Ultimately, he says he learned to put all those things on the side and be upfront with the potential buyer.
"The numbers and the graphs and how you create the value is one thing," he says. "But if you're going to exit with private equity, and you're looking to go ahead and have a roll-up strategy, and you want to be a part of it, then you really need to figure out your objectives to be very upfront with them early on. Otherwise, you waste a lot of time back and forth."
When taking a company to market, he says a seller won't be sure who's going make an offer and who's going to have the best offer, so be prepared to play the different angles.
"Is that a strategic? Or is that a private equity? Do you want to have them control or you're going to be a minority owner?," Junaid says. "So, whatever that might be, my humble request is going to be take it how it goes and make sure that you almost — because it's a very tedious process — you almost have to start preparing two years in advance. Make sure you are set up, everything is transparent, because you will take the structured approach of private equity away from your value add if you're not ready for it."
Because of the proliferation of SaaS companies, a change he says he's seeing recently is that increasingly buyers want the values of those businesses to be connected with positive EBITDA.
"It used to be that, I have a great idea. I'm going to raise X amount and I can run the business," he says. "(Now) the SaaS companies are day and night. The values right now are crushed, unless you're in the similar type of business — which we are as a supply chain and we are offering that as an extra service to the customer — because they want to see the positive trend."
Not only is it important for sellers to prepare their business as they near an exit, he says they also need to find the right partners, in terms of advisers, based on the type of company being sold and align it with the adviser's experience. That's because it's a different exit for each company type.
"The balance sheets and the P&Ls are all the same," he says. "But in terms of how the magnitude of the values and what the trends are... Right now, everybody's got this trend, which they're going to run all these models to say, 'Hey, we are conservative, your value is going to be different.' So, you got to bring the right advisers when you're getting ready to exit."
Further, he says the legal part of it is critical because it's easy for owners to overlook information that buyers want to see, such as client contracts, patents and trademarks.
"Select your partners the best way," Junaid says. "They're your best advisers to help you navigate the selling process."