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Who should buy my company?
It depends……
What are your goals and objectives? Do you want to sell your business:
· in part and remain involved with its operation
· in full and remain involved with its operation
· in full and retire completely from its operation
How long are you willing to aid in transition?
Are you willing to provide seller financing or accept an earnout, or do you require all cash at closing?
Do you have a management team in place?
Do you have family members in the business? If so, do they intend to remain with the company?
When it comes to exit planning, A good place to start is with the end in mind. By first identifying the ideal outcome of your exit, you will be able to determine the best partner for the transition.
Here is a brief comparison of the most likely buyers for your business, and what a sale to each might imply.
Strategic Buyer:
Businesses that pursue growth through acquisition are often referred to as “strategic buyers” because they look for acquisition targets that are aligned with their core strategy.
Your business might command a higher sale price for the synergies that make your business a natural fit. However, a higher price can come at a cost. Redundancies between the two companies may be eliminated during the merger or acquisition, risking the jobs of employees that overlap like accounting, human resources, and marketing. Your brand and identity may be absorbed by that of a competitor.
Private Equity:
Private equity firms are investment vehicles for institutional investors or high-net-worth individuals. Limited partners (“LPs”) invest their money into funds that general partners (“GPs”) of the PE firm use to buy companies. PE executives seek to maximize the growth of the portfolio companies over 5-7 years before selling them and earning a return for themselves and their investors.
PE executives bring the financial resources and the corporate acumen to take your operations to the next level, and in many cases, they will retain company owners and operators for on-the-ground expertise, making them a great option if you’d prefer to retain a piece of your equity stake. Selling to a PE firm is a great way to help your business realize its full potential.
Family Office:
Family offices resemble private equity firms, but they differ in important ways. Rather than acting as investment vehicles for others, family offices invest for the family or families, often with a focus on the industry that netted that family its fortune. The Family Office's primary objective is to ensure that familial wealth spans multiple generations.
As a result, as compared to private equity firms, family offices tend to hold more conservative portfolios, invest on longer time horizons, and take less active roles in their portfolio companies.
Search Fund:
Search funds consist typically of an individual, backed by a team of investors, looking to buy a business and take over the operations.
The individual aspires to operate a business. His team of investors is willing to buy the company for him to operate, confident that he will generate a return with their guidance. Such a buyer can be a way to ensure the long-term vitality of your business by infusing the C-suite with youth and energy.
Employees:
An exit opportunity that allows your company to maintain its current course in your absence consider your employees. An employee stock ownership plan (ESOP) will gradually transfer the company’s equity into retirement packages for your employees.
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Contact me as I am happy to elaborate on the types of buyers and how they may fit your goals and objectives.
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