As a business owner, the thought of selling your company has likely come to mind when considering an exit. It’s no secret that it’s both a significant decision and undertaking, so gaining an understanding of how to prepare and what to expect can alleviate some of the stress in the transaction process.
Here are the top three considerations for owners of staffing firms thinking about a sale:
- Consistency – Buyers are interested in businesses with a track record of consistent growth and strong profits. Historical financial performance creates the basis for long-term forecasts and gives credibility to the strategic direction of the company. A common misconception is that having one great year immediately translates to a premium price. Although a strong current year could be an indication of significant growth opportunities, owners should temper expectations if there is volatility in the financial history of the company.
- Plan – Positioning the company to sell should start three to five years before you intend to exit. Maximizing the value of your business requires a significant investment in time and money. The process should start by finding the right transaction advisory team that can walk you through the merger and acquisition lifecycle. This includes an assessment of potential vulnerabilities in your business, which may include customer concentrations, technology and cybersecurity, tax structuring, and accounting sophistication. The right advisors will help you navigate and mitigate these risks through system upgrades, customer risk analysis, and obtaining assurance over financial statements through an audit or review engagement. As the company gets closer to a transaction, sell-side financial due diligence should be considered in conjunction with an audit or review of the financial statements.
- People – In running a successful staffing firm, you understand the importance of employing the right people. It is no different when evaluating a buyer. As you contemplate a transaction, it is important to understand what is most important to you when finding a partner to transact with. Is it the highest dollar or strategic versus private equity buyer? These types of questions help answer how your employees and company will be taken care of. Generally, if the owner is heavily involved in operations, the buyer will ask the owner to sign an employment agreement and stay on for two to three years to help with the transition, so it is important to understand what is most important to you when finding the right partner to work with.
The transaction process is lengthy, challenging, and time-consuming. Finding the right transaction advisors that are willing to prioritize you is critical for a successful and smooth process. The advisors at Withum are focused on providing the highest level of service to best suit the unique needs of staffing companies and be a partner throughout the merger and acquisition lifecycle.
Authors: Nicholas Murakami, CPA | [email protected] and Michael Ritchie, CPA | [email protected]
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For more information on this topic, please contact a member of Withum’s Staffing and Consulting Businesses Services Team.
