The Channel Wire

August 22, 2008

In a tough economy, is there still a market for solution providers who want to sell their businesses? The answer, according to a panel of experts assembled at this week's XChange '08 conference in Dallas, is yes. In a session moderated by Everything Channel Vice President and ChannelWeb Editor Larry Hooper, solution providers learned that larger deals might be hitting a dry spell, but smaller deals are still going strong.

"Deals under $50 million are still consistently happening," said Richard Bernhardt of the M&A Forum, a resource for businesses in the market to buy or sell. One thing that has changed is the time it takes to close deals, Bernhardt added. Instead of a few months, the due diligence process now has stretched to more like five to eight months, he said.

One area where owners tend to make the biggest mistakes is in the valuation of their businesses, said Frank Helstab, managing director of The Institute for Corporate Planning & Finance. Don't leave it up to your accountant, Helstab said. His or her job is to make your business look as small as possible for tax purposes. It's a different game when you're trying to assess to true worth of your business to a potential buyer.

For partners considering mergers and acquisitions, here are a few more pieces of advice from the experts:

Start planning now. When should you start planning to sell your business? The day you incorporate, Helstab said. "One hundred percent of you will receive at some point an unsolicited offer. If you're not prepared, you'll just throw yourself into helter skelter."

Build a team. When it comes to buying businesses, the folks plunking down the cash are usually experts. They've done it before, many times over. But you as a business owner may only ever sell once or twice in your lifetime. They'll have a team in place to help them, and so should you: your accountant, your CFO and your financial advisor.

Don't negotiate your own deal. If their decision-maker is using a proxy to negotiate, then so should you.

Focus on services. Bernhardt maintains that a higher mix of services revenue, particularly recurring revenue, helps raise the value of the business.

Don't make real estate part of the deal. If you try to throw it into the mix, you're only going to ensure that you get less for your property than it's really worth.

Don't take your eyes off your business to sell it. If your business falters or fails because you're too distracted with a potential sale, buyers will notice.