Business Acquisition: The Premium in Predictability

If you’re a buyer, you don’t want to acquire unpredictability. That is, you want to avoid an acquisition where the transition or post-sale management could prove chaotic and lead to a drop in revenue as a result. 

It goes without saying, but any time you buy something (especially something with a big price tag!), you want to be certain you know exactly what you’re getting. 

Can you imagine buying a home that changes its floor plan post purchase?

As a seller, predictability helps boost the valuation of your company and increase the likelihood that it gets sold for a fair market (and ideally lucrative) price.

And, one of the best ways to ensure predictability is by ensuring the right people are in place.

Again, having the “right people” in the business is important for both the buyer and the seller.

With a strong management team, that’s incentivized (via bonuses, ownership etc.) to remain with the company throughout the transition, a buyer can be assured that even if they need to add a couple of additional pieces in key roles after purchase, that the business has a solid core of people who are able to move the business forward and help it grow. The existing team helps avoid the chaotic transition.

As a seller, having the right people in place ensures that a potential buyer doesn’t get “swayed away” by red flags.

For example, a buyer who sees a business with massive turnover, no clear succession plan, and overall disarray in its people could very well decide the purchase isn’t worth it. They might anticipate snags in the transition before they even happen, and conclude that there’s far too much risk associated with a purchase.  Or, the buyer will determine that your business isn’t worth what you, the seller, think it is.

Truly, there’s a premium in predictability.

Whether you’re seeking to buy or sell a business, ensure you’re doing what it takes to create and identify predictability to ensure success. 

And, one of the best ways to accomplish this is by focusing on the people within the business.

It goes without saying, but this, of course, just scratches the surface in the name of predictability when buying or selling a business. 

There are a multitude of variables involved in any acquisition that can create unpredictability and, ultimately, havoc in the process. 

Having a capable legal team beside you to help identify and manage these variables can bring some much needed peace of mind in the financial, operational, and legal aspects of an acquisition or sale.

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