“So, who is the best buyer for my business?”
We get this question all the time at our educational exit planning conferences from business owners preparing to sell their company. At that point, it is far too early for us to answer because we need to spend several weeks getting to know the business through our in-depth evaluation process.
And, on top of that, we prefer the term “optimal” rather than “best.” Best implies perfection and that is hard to find in any business transaction. Optimal means the deal accomplishes the goals of both parties, a win-win all around (or as much as possible given that, in negotiations, each side must compromise a little in most cases to get an agreement completed).
So the answer to the question of who is the optimal buyer for your business is this:
It all depends on your personal financial goals, your goals for the company, and finally, what the buyer brings to the table, not only financially but also synergistically.
The first two factors you control; the latter is vital but really boils down to how good a fit you see between your company, your employees, your customers and the buyer. But let’s take each of the items above separately.
First, we highly recommend that you meet with your wealth manager long before your deal closes to determine how much you will need post-close to maintain your current lifestyle. Unfortunately, far too many wait until after selling their business and are disappointed to learn that if they had held the company a few more years and implemented some growth plans, they may have received more.
Side note: This is why the services of Generational Equity are so critical to our clients. Our first step is a thorough and complete valuation of the business to determine the current business enterprise value (BEV). This is based on the significant recasting and research we do on your business.
From this valuation, in addition to the BEV, flows our Roadmap for Enhancing Value. It provides you with concrete ideas and strategies about how to grow the business so that if the current BEV does not meet your financial goals, you may be able to eventually reach that number.
So two key points: In order for your wealth manager to create a plan for you, it is vital to know the BEV of your business and to determine if that meets your financial needs. If not, you need strategies to grow, which professional M&A advisory firms like Generational Equity provide.
It is very interesting to see the motivations of our clients change as they move through our process of selling their business. For most, at the beginning of the process the attitude is this: Get me the biggest deal and I will take it immediately.
However, after 3-9 months with us, as they really think about their exit, quite often they are willing to take less money if the buyer is willing to maintain or grow the legacy left behind for the employees and the community. This is especially true in 2nd and 3rd generation families. Often the history and preservation of the name, reputation, and opportunities for key employees become paramount.
You should carefully consider the legacy you want to leave behind as you contemplate your exit.
Because that leads us to the final point: synergies with the buyer. The new owners do not only have to be able to afford the deal, but their management style should also meld with how your company currently operates and thrives.
Sometimes we have clients walk away from deals because they simply do not like the potential buyers’ attitudes, manner, and style. Others will take substantially less in the transaction because they really like the buyer and his team, and can see the business thriving under him/her.
Get to know your buyer. Interview them. Find out what makes them tick and if the culture you have worked so hard to create will flourish under them.
This, in a nutshell, is your optimal deal:
If you can find these three features in a deal, you have done well indeed!
Frankly, these are the types of transactions the dealmakers with Generational Equity focus on finding for every client we engage and take to market. Our team has a proven track record of success that is second to none. That is probably why we have been recognized by our peers so many times over the past several years:
If you would like to learn more about creating an optimal deal for you and your company when you decide to sell, you should set aside time to attend a Generational Equity M&A conference near you. Completely complimentary and highly educational, you will gain a wealth of knowledge about creating optimal deals. Call us at 972-232-1121, fill out a contact form or visit our website to learn more.
By Carl Doerksen, Director of Corporate Development at Generational Equity.
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