Buying and Selling Businesses with Arrowpoint Advisory MD, Daniel Domberger

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If you are an entrepreneur considering selling your business and want to maximize the return on your life’s work, or are currently in the process of quitting, then don’t miss this latest episode of The Melting Pot with Arrowpoint Advisory MD , Daniel Domberger.

The bulk of Daniel and his team’s work at Arrowpoint Advisory – a division of investment banking Rothschild and Co. – typically involves assisting entrepreneurs, owners, managers, businesses and investors with mergers and acquisitions, more specifically the buying and selling of businesses or raising investments for them.

But what does it look like if you are an entrepreneur? How are you preparing your business to go out? How to choose an advisor and what to look for in a consulting firm? Should you do your own due diligence early? And what are some of the pitfalls along the way?

To find the answers to all these questions and more, download and listen now.

In today’s podcast:

Connections:

The Art of Buying and Selling Businesses with Daniel Domberger

Daniel Domberger is MD at Arrowpoint Advisory, the growth and entrepreneurs team at investment bank Rothschild and Co., and leads the Technology team there. According to Daniel, the market is very buoyant right now, so how can companies get their business in shape to take advantage of it?

Get fit to sell

“We often say the stars have to align and market strength is just one of the stars you seek to align. The company must be in the right shape, the right position to be attractive to a buyer or bankable by an investor.

If you’re doing that, if you’re preparing to sell, if the company is showing strong financial performance, if it has good growth prospects, if you don’t see any obstacles in the way, then you’re doing reasonably well.

“We saw earlier this year a rush of companies coming to market that were not sufficiently prepared and were looking to take advantage of dynamic market conditions. But the basics were not done. Because it wasn’t in the right shape, the team wasn’t ready, and a number of them simply failed to complete the trade.

So yes, says Daniel, a lot of market activity is very helpful, but it’s not the certainty of a sale. It’s not the only thing, it’s not even the most important thing if you can’t line up the other parts.

When should an advisor come?

So when should entrepreneurs seek out an advisor like Daniel?

“You don’t have to have someone in custody for 10 years until you’re ready to make a transaction. But as you start to get enough inbound approaches that you are considering, or independently decide that you want to pursue an exit, or raise funds for any transaction, taking appropriate advice from people who do this all day every day, is probably a very sensible thing to do.

Don’t do it yourself.

Leave mergers and acquisitions to the experts

Entrepreneurs like to explore new avenues, take on new challenges, and for many of them, they see mergers and acquisitions as the next thing they want to learn how to do. But, says Daniel, do you really think that learning a variety of rarefied semi-financial terms, i.e. mergers and acquisitions jargon, in order to master the art of discussion and negotiation, is the best use of your time and energy?

Or could you take advantage of the knowledge and experience of people who use these terms as tools of their trade all day, every day, and put your energy and time to better use elsewhere, i.e. say make your business even more attractive to prospects?

Many mergers and acquisitions depend on first principles and market norms, Daniel advises, and if you’re not knowledgeable about how these things are done, if you’re not fully aware of why things happen as they happen, it can be hard to understand the rationale behind what is being presented to you from the other side. This may make you instinctively suspect that the other side is trying to pull off a quick one.

“You can get pulled down in a way that’s really corrosive to the relationship you’re trying to build with your investor who comes in as a partner, or with your acquirer who is likely going to be your boss. So having someone who can have tough conversations for you, having someone who can explain “I know that sounds unreasonable, but it’s not because…” and you can trust them because they are on your side and not on the other side.

What due diligence to do?

How quickly can a deal be struck? The answer, says Daniel, is that it depends. It highly depends on how much preparation you have done beforehand.

“If you’ve ordered the due diligence on your own business before you go to market, that allows you to close a deal much, much faster than if you waited for the buyer or investor to do the due diligence on their own. own pace, and at their own expense during the exclusivity period.

So if you’re planning to sell in 2022 or 2023, should you do your due diligence now? Well, says Daniel, seller due diligence spans multiple areas: financial, business, legal, and technical.

But whether you do now or not depends on several factors. Take finance, for example. Financial due diligence is done by accountants, but if you hire accountants too soon, with each passing month, that information becomes more and more outdated. On the legal side, however, it is less urgent.

Where it’s good to get a head start on due diligence, advises Daniel, is if you’re in the tech business and need to review your license terms, especially your use of open components. source. If you do anything for consumers, make sure your data processing terms and conditions are correct.

Commercially, you don’t need to do a lot of due diligence before initiating your own trade, says Daniel. Strategically, you might find it useful as it might identify areas where you haven’t been looking for growth opportunities. Having a commercial due diligence report often includes customer surveys and feedback which is often operationally very useful. They identify areas where you are satisfied or things could be done better.

Something to do tomorrow

If you’re thinking of selling your business, what’s the one thing Daniel advises you to do tomorrow?

Take some advice.

“I think tomorrow you could call two or three investment banks, corporate finance advisers, to get their idea of ​​the current landscape and how it’s likely to evolve in the future.”

Determine which investors you might consider. Which companies have the most to gain from buying your business? What options are available to you? By doing this early, you invest very little, but you could potentially earn a lot.

Book recommendations

Listen to the episode here.

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