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My guest today is Bill Casey. Bill is the Vice Chair of the Transaction Advisory Services department of EY (Ernst & Young Global Limited.) He has been an employee of EY for 35 years and has seen many market changes come and go. Bill has an MBA and a background in audit, a solid career choice he believes for anybody wanting to get into the financial sector.
During today’s show, we discuss the 2018 M&A Firepower Report. Bill shares some of the trends emerging in this year’s report. We speculate what that could mean for the economy and how American tax reforms are affecting the trends. Bill also gives some foolproof advice for business owners thinking about selling in 2018. We cover the traits that are making companies attractive to buyers and how a seller can make their company more enticing in this current climate.
What are the key things you should do to prepare your company for acquisition? Bill Casey, with his 35 years at EY, says it all comes down to due diligence (or reverse due diligence). This isn’t just your run-of-the-mill due diligence, however. You need to take a close look at your company’s operations from both the tangible and intangible aspects.
At this point in the game, every entrepreneur knows about due diligence—at least in terms of the financials. So before you think about selling your business, make sure your books are in order. You need to know them inside and out, including where your weaknesses are, liabilities, potential legal kerfuffles and the state of your assets before you pass the business on. No buyer wants to acquire a company that is riddled with unknowns or risks that could potentially impact the future earnings or cash flows of its acquisition.
But that’s not where your due diligence should stop. You need to evaluate your intangible assets as well. Things like goodwill, customer/client retention, your employees and even your reputation and company culture all add (or detract!) from your business’ value. Brand names have power and impact the market, just by reputation alone. Does your company do that? Do people vie for positions at your company when they come up because you are so well-known for a cool company culture or how you treat your employees? These and other intangibles impact your intrinsic value just as much as your tangible assets do.
There is a lot you can do with tangible assets, and your financial team can help you sort out the various things you should focus on (past-due accounts, landing a few new clients, etc.). For the intangible assets, however, you may need to get creative. You’ll need to focus on things like building up your company’s social and cultural presence, reputation and vision. When you decide to sell, part of your due diligence will be to ensure that the things that make your company so special, and so valuable in its uniqueness, will carry their weight into the new arrangement.
This is why doing your due diligence before you start the sales process is vital. You’ll need time to make things right or improve what you have to drive a better deal. Identifying the aspects of your company culture which drive the most value gives you even more chips at the negotiation table while allowing you to identify any potential counterpoints.
The thing with intangibles is: they often come down to fit. Do the intangibles (and their quality) of the acquirer and acquiree match up?
Knowing what you want out of a merger or acquisition is vital to the success of the transaction. You need to know if you want to stay on or get out completely, what you want to happen to your employees and the style of acquisition you’re looking to see—do you want your company to carry on in a similar fashion as when you ran it, or does it matter to you if you get absorbed into another entity almost entirely?
The last thing you want is seller’s remorse because you made the wrong deal. Once you know what you’re looking for from your exit and in the company you eventually sell to, you can work diligently to get the result you want.
Find out the strengths and weaknesses of the acquiring company, particularly in terms of the cultural aspects and how they will impact your company. Integration is the hardest aspect of any merger or acquisition because there are so many elements to get right. The buyer may have a stronger culture in some areas and you may have some points in your favor in others. Figuring out which areas can complement each other can save you both a lot of headaches—particularly if you want to see something of your legacy live on.
The tricky part about this is putting it all together in your sales pitch.
Once upon a time, you were your company’s strongest advocate. Maybe you still are? (That’s a discussion for another time.) Either way, someone needs to be the salesperson that gets your company the best deal possible. This means that you need to really sell it, as they say. So how do you do that?
Take everything you learned in your dual due diligence—your strongest numbers, your brand’s strength, etc. —and use this information to showcase your business and justify the price and terms of the deal.
Maybe you’re not your own best salesperson. The proof, as they say, is in the pudding. It’s time to bring in some of your employees to speak to the quality of the company. After all, part of your success is because of the stellar team you’ve generated—and, if you have the A-team on your side, no company is going to risk losing them!
Either way, at some point, you’ll need to include your management team in your plans. They’ll need to know what is coming down the pipes so there are no shocks or surprises that make them do something rash. If you’ve taken care that your employees will be looked after once the sale is completed, they can help smooth the process over even more than you can. Let them help you make the sale and get the terms you want.
Use all your assets to secure the deal you deserve for the company you worked so hard to build.
EY Transaction Advisory Services
Bill Casey on LinkedIn
2018 M&A Firepower Report: Life Sciences Deals and Data
William (Bill) M. Casey is the EY Americas Vice Chair of Transaction Advisory Services (TAS), which helps organizations raise, preserve, invest and optimize their capital. Bill advises clients on capital strategy, mergers and acquisitions, public company spinoffs, IPOs and securities offerings. Bill has led some of the largest client engagements of Ernst & Young LLP, including cross-border transactions for major multinational corporations and leading private equity firms. Over the last decade, he has worked to help double the talent and revenues of TAS practices in EY Americas member firms, which now include more than 3600 professionals based in the United States, Canada, Mexico, Central and South America. Bill is fluent in English, Spanish and Portuguese and a competitive triathlete. (EY.com)
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