How your Board can help your company sale

When I sold my company in 2013, my Board of Directors were life-savers.

They stepped in to help me a number of times. I used them to help me find and schmooze buyers, play the bad guys to push up the valuation, and as a sounding board when negotiations got intense.

It felt like we were all on the same team, pushing for the best deal for everyone.

I remember thinking... I couldn't have done this without them.

I've written a lot about the weight of expectations as the CEO and owner selling your company. It can be a lonely experience.

Your Board members and other advisors can help you through the trickiest parts of the sale.

Let's explore how they could help you like they helped me.

The role of the Board in M&A

In big M&A deals, the press discuss whether the target company’s Board supports the offer or if it’s ‘hostile’.

These are usually public companies, where the Board has a formal role to represent the public investor base and ensure that these shareholders get the best deal. They are a key part of the process.

For private companies, the role is much less formal.

Remember... the sale contract is actually between the buyer and the selling shareholders. The company itself is not a party to the contract, and the Board of the company does not have any active role in the process.

Your Board members are still very important stakeholders, but more informally.

No formal Board? Maybe it’s just you and your co-founder grabbing coffee once a month to talk things over. That’s fine — these principles still apply if you have advisors know the business and have the right skills to help with the exit process.

In this article we will refer to them as Board members, but whether they are technically sit on a 'Board' or not is irrelevant.

Getting them onside

Usually, your Board members own a piece of the company. Maybe they invested cash, or maybe you gave them shares or option for their advice.

If so, before they can help you through the sale you need to get them onboard with selling the company now and at the valuation that's being discussed.

That's a whole topic in itself... which you can dive into here: Getting key investors onboard with your exit.

Your Board's super-powers

Great Board members have a set of skills which make them perfectly placed to help you during the exit.

These are:

• Detailed knowledge of the business. You will get lots of well-meaning advice from afar from those without much context of your business or your industry. Your Board are ‘inside the tent’ and know your business, its strengths and weaknesses and the market inside out. That makes their advice much more likely to be accurate.
• Wide networks. Board members and advisors tend to be promiscuous, taking up similar roles with lots of companies. If they are experienced investors too, their investments will have connected them with many other companies and investors. That gives them a big contact book, which you can use in various ways to help get the deal done.
• Credibility. The best Board members are well-known and well-regarded in your industry. You can 'borrow' this credibility to help you get buyers excited, or to push back during negotiations, in a way that you may have struggled to do alone.
• Skin in the game. Talk is cheap. Advice means more if it comes from someone who stands to gain from a good deal, and to lose from a bad deal. You'll notice their advice is more considered than others.

Nine ways your Board can help you

Let's run through the specific ways your Board members can help you throughout the exit process.

1️⃣ Advice on whether to sell

Before you get into the sale process itself, you will be wrestling with the question of whether now is the right time to sell or not.

Your advisers have the full context of the business and it's performance, industry trends, and know you and your family situation personally. That means they are one of the few people who can truly guide you through the question of whether to sell or not.

Read more at The Time is Right: When to sell your company.

2️⃣ Finding buyers

A well connected Board can be great at helping you to find buyers, confidentially 'putting out feelers' to see which buyers might be interested in exploring a deal.

If they are well-known in your industry, and they have good credibility, they can really help to get potential buyers interested.

If you have a buyer approach you, your Board members can also help to 'vet' them... using their wider network of contacts to see if the buyer is genuine and has a good reputation in the industry.

3️⃣ Relationship building with buyers

In Who's on your buyer's team?, I explained that you need support from across the buyer's business. You want multiple people to be supporters of their acquisition and to speak positively about you, which will help the deal get done and help you get the best terms.

Your Board can be invaluable here. Ideally they will already have a contact within the buyer who they can reach out to. If not, you should ask them to connect with senior stakeholders within the buyer to build relationships and excitement within the buyer.

4️⃣ Finding professional advisors

Appointing lawyers, accountants, tax specialists, M&A Advisors is one of the most stressful parts of the exit. You want the best people on your side, but who is really the best in the business? And the fees can be eye-watering, so are you getting screwed?

Experienced Board members will have a shortlist of specialists they've seen on previous deals, and will know who stands out as being the best for you. And they know what's a fair price.

5️⃣ Negotiation advice

This is where I personally got the most help.

It was my first company sale, but my Board members were well-experienced and had seen lots of exits.

That's really helpful when you get into the detail of negotiations. You can use them explain a difficult concept, check if a buyer's request is normal, role-play before a big meeting, or give you ideas for how to unblock if your negotiations get stuck.

See the final paragraph for how the input of these Board members aligns with more formal deal support from a firm of M&A Advisors.

6️⃣ Supporting in buyer meetings

I never actually did this, but it can work really well.

Point 5 above is private advice to you, supporting and coaching you behind the scenes.

You can also put them in front of the buyer in meetings.

This really works best if they have high credibility. You are using their reputation and industry-standing to instill confidence in the buyer and strengthen your negotiating position. You still need to the take the lead, but having them in the room with you can be a real source of strength.

7️⃣ Playing the Bad Guys

Sometimes in a negotiation, you just need to push back and say No. That can be hard when you've built trust and a strong relationship with your buyer.

You can use your Board members here – assuming they are shareholders too.

Explain to the buyer that they just won't sell on those terms and will tell other shareholders not to sell either.

"I'm sorry, but I just can't get them over the line at that valuation. They will only sell for over £xx. Perhaps they are being stubborn, but I am afraid they just won't budge."

I used this line a few times with my buyer, and it worked.

If the buyer wants to own 100% of the business and the drag along rights won't kick in, it forces the buyer to re-evaluate their offer without you looking greedy or stubborn.

8️⃣ Confidential support through DD

When you are preparing for due diligence, you will find some issues that might be concerning to a buyer.

As we flagged above, the Board members should know the business inside out. And you can confidentially get their advice how to urgently work through those issues, figuring out how to fix them, or how to disclose them to the buyer.

The chances are, they will have seen a similar issue before, and can help you manage the issues before they become red (or amber) flags to the buyer.

9️⃣ Managing your investor base

In Getting key investors onboard with your exit I discussed the importance of clear comms to the wider investor base. You need to get them excited about the sale.

This communication (and dealing with ideas, questions and complaints) can be a lot of work, especially if you have a wide and vocal group of investors.

You can lean on your more influential investors for help here. These are the investors who others turn to for guidance on whether the deal is a good one.

If these leaders support the sale, the others will usually fall into line without much fuss. And it will save you a bunch of time.

Working with the Board

Here's how I went about getting my Board members engaged and actively helping on the sale.

I reached out to each individually to see how they were keen to help. Some wanted to be heavily involved, others were busy on other projects and had less time to offer.

We then set up a regular weekly call with the group, where I would update them on negotiations, any issues that had arisen and where I needed help. I would send a short note beforehand.

And if a big and urgent issue came up, we could convene at short notice outside of the regular calls.

With the more active Board members, we also spoke 1-on-1 as needed too.

Should you pay them? They should already have some upside in the deal, so there should be enough incentive to support there. If they are really working hard – actively reviewing documents, attending meetings, working on DD issues – you might think it's appropriate to offer additional payment. A good idea is to make that contingent on the deal successfully closing to protect you.

What about M&A Advisors?

How do these Board members work with the firm of M&A Advisors who you might appoint to help you with the sale process?

They don’t replace them.

They have different roles. The firm of M&A Advisors are are much more hands-on and do a lot of the heavy lifting: pitching buyers, producing marketing material, preparing data rooms, running valuation and synergy calculations and so forth.

Your Board members are likely to be much more strategic, giving advice, introductions and other insights as outlined above.