Blackmore Partners: Preparing Your Company For A Buyout

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Financial professionals such as the private equity intermediary firm Blackmore Partners recognize the power – and relatively common business practice – of a company buyout. In many cases, a buyout may seem like bad news for an organization. However, as a strategic business move, buyouts frequently yield significant improvements in overall company operations. The end-result of a strategic buyout often serves both businesses – the acquiring firm and the acquired one.

As the staff at Blackmore Partners note, companies large and small are often left confused once a buyout deal has been finalized. Business professionals who have never experienced a buyout may not recognize the important steps necessary to help facilitate the transition. This holds true from the owners and the executive management team, all the way to the staff.

For companies preparing for a buyout transition, business news source Inc. has released a recent report clearing things up. Contributors Karl Stark and Bill Stewart describe several important steps that business owners and management teams can take to better prepare for a buyout. These steps can make the difference between a smooth and simple transitional process and a complicated mess of an exit strategy.


Preparing for the Unexpected

The key to facilitating a simplified buyout process is to situate things far before the actual buyout occurs. As Stark and Stewart write, “Even if you are many years away from selling your business, you need to ensure you are prepared for the unexpected. Business valuations fluctuate as the capital markets ebb and flow, and it’s important to maximize the value of your life’s work.”

According to private equity intermediary firm Blackmore Partners, the best strategy is to always think of an acquisition ahead of the fold. Companies should prepare for an inevitable buyout even if they’re not intending to sell. This holds true whether a business owner is approaching retirement or just getting started.

As a Blackmore Partners representative notes, “Remaining proactive for any business decision will always ease the inevitable transition process. This is critically important for buyouts. Preparing yourself ahead of the curve will keep you and your business ready to make those major changes.”


Getting a Business Ready for Buying

Preparing for this type of a business move is not necessarily presuming a buyout will occur. Early preparation is much like flood insurance, for example. It’s a precautionary measure to remain better prepared for something which could occur. The business world is much like a flood zone in real estate. Those who prepare ahead of time for a potential flood won’t suffer the consequences if that flood inevitably occurs.

The first – and arguably most difficult – step is for businesses to work toward remaining competitive. Companies need to maintain a sharp advantage over competitors within their respective markets and industries. Companies that go into potential acquisitions on the decline inevitably lose out. By remaining competitive and offering unique advantages throughout business operations, firms will continue to succeed. And they will also demand much higher asking prices for companies interested in acquiring them.

Another important step proactive business should take is to research companies who may opt to initiate a buyout. Recognizing the companies who are moving toward acquiring other firms in specific industries can help businesses assess their viability in the market. If a firm is interested in a buyout, steps like investing in the buying company could help improve the likelihood of the deal.

All these steps lead to one immediate conclusion – start making these changes in business operations immediately. Even if a company is not poised for a buyout, these types of positive changes will only serve to improve overall business operations and revenue potential.


Getting Management on Board

Beyond the ownership side of the business deal, a company’s management team must possess the skills to facilitate a buyout transition. According to Inc. contributor Darren Dahl, the same principle of early preparedness is critically important within executive management as well. It’s important for businesses to recognize when to inform their side of the integrated management team on getting ready for a buyout.

As Dahl reports, many integration and acquisition researchers recommend informing a company’s management of a buyout when the deal is 50% likely to go through. While it may not necessarily occur, taking action once a deal is more likely than unlikely makes business sense.

In Dahl’s words, “When you’re confident the deal is going to happen, it’s time to start looping in the people that will be managing the new business on the details of when and how the deal is going to be completed.  When you have their buy-in, the planning downstream is likely to go more smoothly.”

Once management is on-board and informed of the transition, the best advice is to keep the process as transparent as possible. Buyouts are often rife with ambiguity, rumors, and misinformation. Rather than letting these toxic effects persevere, opening up communication can make the transition even easier for a management team.


Getting on with Business

Buyouts and acquisitions are a common aspect of business operations. There are two options to a buyout procedure for owners and executives: smooth or complicated. By taking preventative measures and remaining open about the process, companies can make the process as smooth as possible for everyone involved. As the financial professionals at Blackmore Partners see it, smoother transitions only equate to continued successful business operations.


Harvey Greer contributed to this post.