Five misconceptions surrounding the sale of a business
The process of selling a business often comes with a high degree of misconception surrounding it. During our initial meetings with clients, these commonly held misconceptions often come to the fore and our directors are tasked with presenting the realities surrounding the process.
The following are, in no particular order, the top five most commonly held misconceptions.
1. Now isn’t the right time to start thinking about a sale.
Lets start with the most common mistake business owners make. Procrastination when considering an exit from a company can severely affect the potential for gaining maximized value from an eventual sale.
It really is never too early to start preparing for the sale of a company. Business owners who receive the highest multiples upon exit are generally those who have begun grooming their company for the eventual purchaser several years in advance. An acquirer is always likely to pay more for a company that they perceive to be the best fit for their organization, so it definitely pays to keep an open mind regarding how a potential purchaser would view your company.
2. I have to leave the company.
In most cases, business owners believe that selling a company means a complete break. The reality is that, in the majority of cases, the former owner will continue with the company, at least in the short term, and play a major role in the running of the company.
Strategic buyers will generally request the exiting owner stay on in some capacity in order to smooth the integration process. Financial acquirers (VC’s / PE’s) are often attracted towards companies with management teams willing to stay on with the company post-sale and is a strong factor in ensuring maximum value is received.
3. They won’t care about my company
Whilst private equity acquirers will extensively study financial figures and balance sheets in order to ensure they offer a price they deem to be of value to their organization, this doesn’t mean that they wont care for the overall welfare of your company and its employees. All business owners share the same goals, to ensure the long-term prosperity of their company.
4. I have to time the market
Many business owners believe that due to a poor industry outlook, their company will not be attractive to an acquirer. This could not be further from the truth. An acquirer will gage the overall attractiveness of a company based upon company specific performance and profitability indicators in addition to potentially successful synergies.
5. Financial acquirers wouldn’t know how to run my business
A large number of clients often believe that financial acquirers are just moneymen who lack the professional capabilities to run and grow a successful company. The facts are, however, that financial acquirers will generally have much more to offer than just money. Most will have a group of highly talented individuals ready to step into either a backseat or a more hands on role in order to move the company forward and meet the acquirers expectations.