Despite their powerful position in a hot mergers and acquisitions (M&A) market, almost half of corporate sellers believe that they did not get the best price the last time they closed a deal, according to new research by the audit, tax and advisory firm KPMG LLP.

Of the corporate sellers surveyed, 46 percent said they did not get the maximum value from their latest sale, while about 25 percent of private equity (PE) firms surveyed said their last deal did not provide the best return possible. KPMG based its findings on interviews with almost 420 M&A decision- makers from large and mid-market companies, and PE firms.

"Conditions for anyone looking to divest a business could hardly be more favorable, yet many sellers acknowledge they are leaving money on the table," said John McPhee, a Transaction Services partner at KPMG. "Poor planning, an aggressive timetable and mismanagement of certain other deal aspects pose the most difficulties to getting the best return."

More than two-thirds of those surveyed said they experienced issues after closing the deal, which can lead to lowered deal values. Of those experiencing post-closing issues, the most commonly reported include:
- Warranty and indemnity claims (27 percent),
- Closing-balance sheet disputes (22 percent),
- Unforeseen accounting issues (22 percent),
- Unforeseen tax issues (17 percent),
- Unexpected price adjustments (17 percent), and
- Unforeseen separation costs (16 percent).

Interestingly, the top three issues - warranties and indemnities, balance sheet problems, and accounting issues - were the same in a similar KPMG survey three years ago, suggesting that while sellers may have made some strides in the sales process, there is still room for improvement.

"Surprisingly, despite identifying shortcomings in their sales process, 70 percent of corporate executives surveyed said they were unlikely to change their approach over the next five years," said Brian Heckler, a Transaction Services partner at KPMG. "Until companies place as much strategic emphasis on selling a business as they do on buying one, they will lag in terms of maximizing value from a sale."

McPhee added, "The first step when preparing for a sale is to determine what will be sold - identifying people, products and assets. It may seem very basic, but many sellers can't clearly define the parameters of a sale at the onset because they have not prepared properly. After defining what will be sold, the seller can begin its own presale due diligence, making sure to understand the assets' value and what issues may affect that value. The process also allows sellers to understand what impact the sale will have on retained parts of the business."

In addition, although there is a perception that a quick sale is better, the KPMG survey found no correlation between success and the timeframe in which it took to close a deal. However, the survey did find that PE firms reported shorter deal timeframes, with 77 percent reporting
eight months or less to close a sale, while just 55 percent of corporate sellers were able to close in that same timeframe. The survey pointed to the need for both groups to gain better control over the sale timeframe, with 65 percent of PE respondents and 69 percent of corporate respondents reporting a lack of control over how long it took to close their last sale.

"PE firms tend to designate staff to specific tasks and they use outside advisers more frequently, allowing them to feel more confident about their sales," said Heckler. "Corporate management, meanwhile, may miss their chance for improved results because they are focused on meeting a shortened timetable, which can limit the opportunity for critical planning and bringing in advisers."