Situation: A company’s founder and CEO wants to sell the company. The company’s software is well-suited to current governmental priorities and should be of value to potential buyers. What are the best steps to take both to prepare for a sale and to sell at the highest price? How do you prepare for sale of the company?

Advice from the CEOs:

• Add a person with connections to potential buyers to the board.
• Look for an M&A specialist who knows the company’s market.
  • The right specialist will help validate the valuation of the company, review and identify potential purchasers, and make the inquiries that will lead to the sale of the company.
• Investigate M&A cases in the industry and related technologies – both cases of firms like the company and cases of companies that may be suitors to determine their purchasing behavior.
  • This will help develop strategies to maximize the value of the company and the optimal bargaining position and will help prepare for negotiations.
• Maximize the value of the company in preparation for the sale.
  • The fastest business growth may come from within the company’s current customer base – additional business customers where the company already has contacts.
  • Work up the food chain within existing customers to increase the company’s business within these companies.
• Important preparations for a sale:
  • Assure that financial records are very clean. These are critical during the price-setting process and in negotiating the final price.
  • In computing company valuation, exclude the salaries of current principals to improve the income statement. These individuals will be replaced post-sale with lower-paid employees.
  • Continue to operate the company as though there will never be a sale. This maintains the value of the company regardless of what happens.
• How open should be the company be – internally and externally – concerning a potential sale of the company.
  • Be as honest and open as is prudent. The biggest concern will be salespeople who may leave the company if they feel threatened by a sale, or who may stop selling because they do not want to try to explain the situation to prospects.
  • The other “at risk” group is developers, who may fear that they will be replaced or terminated following a sale and who may leave.

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