Having recently capitalized on an unsolicited offer, Environmental Partners CEO Paul Gabriel says constant preparation was the key to being able to take advantage of today's hot deal market.
He says it's a CEO's job to continually reinvest in the company in areas such as accounting systems, the latest and best software packages, as well as tracking KPIs and putting a strategic plan together for ownership and leadership transition. The company had been preparing for the future for the past five to six years. Everyone had what was best for the company down the road on their mind.
"No matter where you think you are on the curve, it's critical," he says. "You just never know when you might need to sell or when it might be an opportune time for the company in its strategic future to sell or be acquired. So you need to be constantly thinking that you might need to sell or want to sell the firm next week, next month. And if you think like that, you'll be doing the right things for the business as a CEO."
Valuations in the market are escalating, he says, and the willingness of potential buyers to spend more, to have higher multiples in a deal, are trending up. Gabriel says as the company was in the process of preparing for the next phase of its internal ownership transition, it discovered it was perfectly prepared to take advantage of an offer.
"Everyone was ready to do it and then an opportunity came along with a tremendous potential partner, which was Apex (Companies), and all of the boxes along the way you could check in terms of whether the deal was right, whether the match was right, the culture was right, the opportunities together, all of those things were positive," Gabriel says. "We quickly made the decision within two months that under the circumstances in the markets today that was the best long-range move for the company. And every one of our owners — and we had 20 owners at the time — agreed. "
An important first step in preparing a company for a sale, according to Goodwin Procter LLP Partner Josh Zachariah, is to make sure that your key constituencies — board members in particular — are in alignment with the expected sale process. That's especially the case with companies that have outside investors with designees on their board. Additionally, he says it's important to bring in council early and connect them with the bankers on the deal so they can set out a strategy early on.
One area many companies don't prepare well for, he says, is the legal diligence exercise.
"That is one of the most intense pieces of the process from a diligence perspective, having your in-house legal in order, making sure that you have all of your key documents and identify those red flags early on," Zachariah says. "If you identify the red flags that may come up in diligence by the third parties, being able to control the narrative about those red flags and hitting it head on so that there's no surprises during the process, that's something that I highly recommend."
Gabriel and Zachariah, along with McCarthy Capital's Bob Emmert, and Gray, Gray & Gray's Derrick Rebello and James DeLeo, spoke at the recent Boston Smart Business Dealmakers Conference, about getting your business ready to sell, covering the best time to start planning, assembling the right team of advisers, knowing the key areas that impact valuation, understanding a Quality of Earnings review, and putting your personal exit strategy into motion. Hit play on the video above to catch the full panel discussion.
