When you are looking to sell your company, a key question that buyers always ask is; What is the strength and depth of your management team? Your response will not only have an impact on how potential Buyers value your business but also the level of your involvement in the business after the sale to ensure a successful transaction.
Why are buyers so concerned about your management team? This group of individuals are the backbone of your business, and their knowledge, expertise, and relationships have played a significant role in your success.
The continuity of your leadership team is critical to the buyers after the sale. Buyers require a strong leadership team in place to continue to drive the business forward and maintain continuity for customers and employees, protect their investment and mitigate risks.
Key characteristics’ buyers look for when evaluating your management team include the following:
- Execution of Strategy: Buyers assess the team’s track record in implementing strategic plans and achieving business goals. A capable management team increases confidence in the company’s ability to deliver on its promises. Can this team grow the business?
- Operational Expertise: Who runs the “show” if you are not there. Running your day-to-day operations is crucial. Buyers will be looking for you to identify a person or persons that have demonstrated the ability to manage resources efficiently, control costs, and oversee operations.
- Relationships: The relationships that your management team has developed over the years with customers, suppliers, and employees are critical. If Buyers believe that you hold the keys to these relationships, it could have a negative impact on the value they are willing to pay and potentially, the sale.
- Culture: The culture you have fostered over the years with your management team and employees is important to you and the Buyer. Understanding the culture, you have nurtured and how it aligns with theirs (Are they a good fit?) has a significant impact that will contribute to your ability to hold onto key employees’ post-acquisition which is critical to the Buyer.
Other characteristics Buyers look at when evaluating your management team include the ability to adapt to changing environments, focus on R&D to drive future growth, integrity, and ethics of the team.
The importance of building a strong management team to support you and your business cannot be overlooked. It is a critical component that Buyers look at when assessing your company’s value and potential for continued success and growth which are keys to a successful transaction.
Osage Advisors provides a lot of guidance in the M&A market and selling a business here on our blog, on our YouTube channel and Podcast.
