Dealmaking is not simply about matching a buyer to a seller – that is not your role. Sellers rarely understand fully how a buyer assesses a target business. This is where the accountant’s expertise is crucial.
Ensuring due diligence
Their due diligence will look everywhere and that means granting full access to your financial records and ensuring that what they will find is not going to scare them off or reduce the price they are willing to pay.
Due diligence is not a game of poker, it is a serious process to enable buyers to understand what they are getting into. A genuine buyer wants to make an acquisition and a good one at that.
As the company’s accountant you need to make sure that everything financial is in good order, and that process commences long before your client puts their business on the market.
Turning around a supertanker
Comparisons to turning around a supertanker are often not exaggerated.
- Long receivables cycles cannot be fixed overnight.
- Overstaffing is not simply about wielding a P45.
- Cashflow issues point to underlying problems.
- Flat or falling sales means the business is drifting and might have a questionable future.
- Squeezed margins cannot be fixed quickly.
All of these can take 12 to 24 months (or longer) to fix, but usually they can be addressed.
Start with the basics
Accountants can start with the basics, which is where the buyer is going to start.
Sellers need to ensure records are up to date to enable all queries to be readily answered. Buyers don’t like hearing that you will look into it, certainly not more than once or twice, and definitely not when it takes a week to furnish the answer, assuming the answer is accurate and will cut the mustard with the buyer.
An accountant who does their job well will raise exactly the same queries as a buyer would. Often an aberration or rogue figure in a trend has a satisfactory explanation but if you can have it at your fingertips the buyer will be a lot happier.
Clients are often coasting along merrily earning a decent living but oblivious to the fact that their “baby”, a lifetime of effort, is having its value eroded insidiously.
Never too early to have that client conversation
Maybe you should be having the conversation with your clients before they have given any thought about retiring. It’s never too early to start – after all, it’s just a conversation and it demonstrates to them that you are on the ball.
A final point is that you can assist your client with reverse due diligence to let them understand the buyer’s financial strength, especially as many sellers are blinded by offers that are in the final analysis too good to be true.
As I tell my clients, “You only sell once – get it right first time”.
