No Match Found
While maximizing the value of your business is a common and important objective of the sale process, it shouldn’t be the only one.
The market for private and family business sales has been steadily strengthening, and valuations are on the rise. The growing number of businesses that are going through a sale process—driven by demographic change—is being matched by a strong demand from domestic and international buyers and investors, both strategic and private equity.
Private companies often receive interest from both strategic and private equity buyers. Strategic buyers are companies who are typically looking to expand their product lines, grow into a new market or add new customers. Private equity firms have a different approach. They inject capital as well as strategic and operational know-how into private businesses in order to accelerate their growth trajectories. Business owners can take advantage of the opportunity to partner with private equity by selling part of their ownership, and sharing in the enhanced future returns when they sell their complete interest in the business down the line.
Regardless of which path you decide to take, the key to a successful sale lies in thorough preparation and planning.
It’s difficult to put a price on your life’s work. You know your business better than anyone, but valuations are often a subjective process, and perceptions will change depending on who’s looking at them and when. After all, the market itself is always changing. That means potential buyers for your business are weighing your company’s scale, strength, risk profile and expected earnings against the growth and risk dynamics of the market. That’s a lot of factors to consider, so it’s no wonder that valuations can change from buyer to buyer.
In order to make informed decisions, you’ll need to know your company’s market value range. That’s why it’s important to establish a baseline valuation with the help of a professional, who can also help you plan and prepare for the sale process.
For the best results, allow adequate time to properly prepare prior to going to market. Make sure you understand the sale process and determine your key objectives. You should give yourself well over a year to prepare for an exit, as there are various operational, human resources, commercial, financial and taxation aspects you need to take into account. Once your plans are laid out, you want to be ready to move quickly on the best opportunities since the M&A market can change rapidly.
You want a buyer who will pay top dollar for your business, but price shouldn’t be your only concern—you have other key objectives that this sale has to meet, for both you and your stakeholders. Finding the right buyer is only possible when you have thoroughly considered your various personal and business objectives, from liquidity and sale price to employee concerns.
If you want to maximize value, make sure your company has growth potential and that you have some projects in the pipeline to get buyers excited: new products, channels or even geographic expansions. You need to take a step back and look at your business from a buyers’ perspective—are there sound plans in place to execute on your new initiatives, and what are your ideas, prospects and strategies around growth and innovation? Buyers will be looking to you, as well as your leadership team, for these plans, and may lean on your existing management to implement them.
You might think that everything would be easier once your business exit is behind you—but every major change is followed by a period of adjustment. Your personal life, and the lives of your family and acquaintances, can be affected in the aftermath of your sale. By making firm plans for your finances and retirement, you can be ready for any challenges that come your way.
Having a sudden influx of money can be a mixed blessing. Once you’ve sold your business, the spontaneous and sizable increase in wealth may lead to difficulties within your immediate circle—or with anyone who thinks you owe them something. These conflicts are sometimes called “sudden wealth syndrome”.
You may find you have too much freedom
Despite dreaming about retirement for some time, the abrupt absence of the company post-sale can have a profound impact on your sense of purpose and identity. Your work has kept you occupied for so long, but now it’s time to find a new passion.
To avoid the problems associated with sudden wealth syndrome, a little estate planning goes a long way. Decide how your wealth should be invested, distributed and passed down to the next generation—and put it in writing so that your beneficiaries don’t have to argue about it.
Have foresight, not hindsight
As you get ready for retirement, you need to separate yourself from the business well before you sell. Identify the best management team to help transition the company prior to, during, and post-sale. To prepare yourself mentally, take time to identify the short-term and long-term goals you want to achieve with your spare time.