Preparing your company for sale: there are five action items that a board should consider to bolster its company's value and to improve the sales process.

• Author: Wilson, Thomas J.

Debt is a vital component for most M&A activity and the rise and fall of M&A activity has been directly related to the vitality of the credit markets. The availability of easy credit fueled the M&A bonanza from 2003 through the credit crash of 2008, just as the demise of Lehman Brothers froze credit markets and sent the M&A market into hibernation.

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More than one year later, the credit market seems to be reawakening. Banks have de-levered their balance sheets and as a result of stimulus money and other liquidity provided by the Federal Reserve Bank, banks appear to be lending again. This development bodes well for future M&A activity. According to businessworld.com, worldwide M&A activity rose to $520.4 billion in the first quarter of 2010 and the number of announced deals increased by 18% worldwide from the same period in 2009.

In addition, the KPMG LLP and the Deal LLC Annual M&A Survey 2010 indicates that 61% of respondents believe that financial sponsored M&A activity will increase in 2010 and 30% believe it will hold steady. In the same survey, 70% of the respondents were more optimistic about the deal environment today than they were one year ago.

This data and other empirical and anecdotal evidence suggest that, absent a major global economic or political crisis, the year 2010 and beyond should see an increase in M&A activity. It is unlikely, however, that the hyperactive price bidding and manic auction process of the past will return soon, if at all. Therefore, any company contemplating putting itself up for sale or seeking to divest itself of a major division should consider taking certain actions that could enhance its attractiveness to a potential suitor and to optimize the M&A process.

There are five action items that a board of directors should consider to bolster its company's value and to improve the sales process. These actions are can be loosely categorized as financial performance, customers and suppliers, management, regulatory matters and contractual arrangements. Some of these actions require considerable planning and are not easily obtainable. The board of directors should weigh carefully the time and resources that could be devoted to any particular action against the deal-enhancing potential of any such action.

Financial Performance

To a large extent, it is all about the numbers: Has your company performed financially and what are its future financial prospects? Although this concern may not be...