Chuck Ludmer, a principal at J.H. Cohn, said:
"A liquidity event can be both exciting and overwhelming. On the one hand, you have funding and can progress your growth plans. On the other, there will probably be a new set of shareholders, an independent board of directors and regulators to whom you are now accountable."
Key themes and issues emerging from the panel discussion provide a useful guide to the liquidity event process and are summarised below.
1. Understand your objectives
Be clear about what you want before entering any equity relationship. Is the goal to get a capital injection, bring in a partner or sell the company? Every day, you need to make sure your plans are still relevant.
2. Know your differentiators
Know how your business is different from the competition; the business model creates business value. Communicate the distinct differences to your advisers. This will improve your relationship with your advisers, who will be in a stronger position to attract suitable investors.
3. Seek out cultural similarities with advisers
Choose an adviser that is a good cultural fit and which views your organisation as an important part of its portfolio. They should have good knowledge of the industry in which you operate, having done a significant number of transactions in that area already – you don't want them to use your business as a training ground.
4. Understand the adviser's role
Establish what it is your advisers want and why they want it. Then, be prepared to comply. Some advisers will be satisfied with a simple financial statement review, while others will need a full financial audit. Be open and honest and relinquish the information requested.
5. Management matters
Strong company management makes a difference to advisers and investors. At the end of the day, you may have a good company that is well positioned, but the wrong management can take it in the wrong direction.
6. Run your company like a public company – even if it's not
Start running your company like a public company. You're more likely to have interest from a private equity firm and have an underwriter take a leap of faith in you if you've had your 'house cleaned' and put a board of directors and segmented committees in place.
7. He may be your best friend but that doesn't mean he belongs on the board
An independent board, with outside advisers that have a strong influence and will align management and investors, is crucial. The 'right' board will know your industry, your business and the market. They will understand your value and be aware of the 'behaviours' that will need to take place both before and after your event occurs. Ultimately, they should have the knowledge and experience to make your liquidity event successful and profitable.
