The process of selling a business can be complex and demanding, requiring meticulous preparation and attention to detail. For that reason, sell-side readiness is an essential component to ensuring a smooth and successful transaction. This comprehensive process prepares clients for the rigors of the sale process, ensuring their data is well-prepared and information flows efficiently throughout due diligence.

In this insight, we outline the essential elements of Palm Tree’s Sell-Side Readiness solution and its role in achieving a successful transaction.

Assess and Augment Financial Reporting & Forecasting Capabilities

The first step in sell-side readiness involves a thorough assessment of the company’s reporting and forecasting capabilities. The goal is to ensure accuracy, timeliness, and compliance with Generally Accepted Accounting Principles (GAAP) while also confirming a robust forecasting mechanism is in place, all of which increases the likelihood of surviving the due diligence phase of a transaction. This assessment involves:

Accounting Procedures and Policies

1. Evaluating existing accounting processes and financial reporting capabilities to meet diligence requests and GAAP compliance.
2. Streamlining processes related to liquidity and working capital analysis, as well as providing detailed supporting analysis.
3. Analyzing historical trends and one-time, non-recurring items to prepare for a likely Quality of Earnings.

Financial Forecasting, Reporting & Analysis

1. Ensuring that historical internal financials align with audited financial statements and previous marketing materials.
2. If necessary, collaborating with Financial Planning & Analysis (FP&A) and accounting teams to stress test forecast assumptions and address any discrepancies to actuals, providing clear and defensible insights into the company’s growth trajectory and potential.
3. Designing and developing relevant, reliable, and robust reporting outputs for historical financial statements, forecasts, and long-range plans.

Data Readiness & Preparation

Data readiness is critical during the sell-side process to provide potential buyers with a clear picture of the company’s past, current, and potential performance. Key aspects of this include:

Data Cleanliness and Integration

1. Conducting data cleansing and preparation to ensure that the data is complete and accurate.
2. Reviewing the current data model’s ability to produce analytics on key business drivers.

Analytics & KPI Reporting

1. Facilitating efficient provision of Key Performance Indicator (KPI) reporting and business analytics during due diligence.
2. Implementing master data analytics dashboards for categories such as customers, vendors, product groups, and market segments.
3. Analyzing historical performance by product or service line using business intelligence tools like Tableau or Power BI.
4. Performing price/volume analysis, product or service margin analysis, and presenting pro forma and/or actuals.

Integrated Team Support

During the sell-side process, it is essential to have a well-coordinated and supported team to handle the increased workload and potential disruptions. This includes:

Supporting the Office of the CFO During Transition:

1. Providing direct support to the CFO’s office to handle additional requests and demands.
2. Assisting management with various workstreams such as data room creation and organization, diligence support, marketing material preparation, closing activities, and post-close activities.
3. Working with management and sponsors to emphasize critical business drivers and the narrative surrounding the gathered data.
4. Serving as a liaison between the sell-side investment bank and internal financial and accounting teams to ensure that the sell-side financial model receives all necessary inputs.

Sell-side readiness is a vital aspect of preparing a company for the complexities of a transaction in M&A. Ensuring that reporting capabilities are robust, data is clean and integrated, and the team is well-supported not only facilitates a smooth due diligence process but also enhances a company’s credibility and attractiveness to potential buyers, all of which increase the chances of a successful deal and potential increased valuation. Many companies face challenges in these areas, such as inadequate financial documentation, lack of a clear growth strategy, and operational inefficiencies. Palm Tree’s integrated investment banking and financial consulting offerings uniquely enable us to take a complete view of a client’s business to solve these complex situations as one team. We are a single source for businesses and private equity firms to prepare for and execute strategic events.

As the M&A landscape continues to evolve, sell-side readiness remains a key determinant of transaction success and a promising future for companies. The Palm Tree Team, with strategic thought leadership, operational expertise, and full suite of M&A services, is well-positioned to efficiently guide companies throughout the M&A process.

About the Author

Mitchel Nakken co-leads Palm Tree consulting service lines, which gives perspectives on financial data that enable buyers, sellers, and operators to make more informed decisions, minimize business disruption, visualize opportunities, and drive value creation. Mr. Nakken has developed a sophisticated team with deep experience across a wide range of financial disciplines including FP&A, M&A, treasury, accounting, and performance improvement for companies ranging from $50 million to over $2 billion.