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Mergers and acquisitions for system integrators: Building, preparing and realizing value

By Clint Bundy posted 12-05-2017 16:25

  
This is the second in a three-part series on Mergers and Acquisitions topics addressing the Control System Integrators Market.


There can be numerous reasons why the owner of a system integration firm may want to sell some or all of the company. Those reasons might include retirement, poor health or a capital need to help further grow the company. Regardless of the reason why, there are immediate steps an integrator owner is recommended to take in the six to twelve months leading up to a sale process.

Establish a key advisor team

  • Wealth and Tax Advisor(s) – Professionals who assist the owner in minimizing transaction taxes through pre-sale initiatives and advise on how to best invest post-sale tax proceeds.
  • Corporate and M&A Attorney – Experienced attorney who focuses primarily on Mergers and Acquisitions transactions.
  • Accountant / CFO – A company accountant, or a company Chief Financial Officer (CFO), who assists during the critical financial diligence portion of a sale process.
  • Investment Banker – Advisor who is experienced to the system integration space, and who manages the sale process, delivers buyer options and drives best value and terms for a seller.

Incentivize senior management
For senior management’s benefit, an owner should consider providing equity, phantom equity or a transaction bonus. A buyer usually likes to see senior managers receive cash at close, or an ability to reinvest equity into the company with a new majority owner, in the interests of keeping management motivated and committed to the company.

Solidify books and records
Ensure the company’s accountant, or the company’s CFO, has completed the annual and interim company financials as well as the latest tax returns. It is also important to understand owner-related expenses included within the company’s financials. Examples of these adjustments include excess rent the company may pay for use of real estate owned by the business owner, country club dues, owner auto expenses and salaries paid to family members inactive in the business.

The steps that an owner and his team take prior to a sale process can be critical in a successful and attractive exit. These elements can be vital when the buyer interviews, selection begins and the due diligence process takes place.

Clint Bundy is a Managing Director with Bundy Group, a boutique investment bank specializing in business sales, capital raises and acquisitions for the system integrator market.


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