Finding "The Buyer" Instead of "A Buyer"

With the stock market reaching new heights with increased volatility and the economy in the position of continued growth combined with low inflation, many business owners are coming to the conclusion that it might be a good time to sell. 

The sale of a business is probably the most significant financial decision that a business person will make in their career. As professional buyers representing investment firms, we know that a few steps can go a long way to ensure that the sale meets all your objectives as a business owner.

Figure out why you are selling.

There are many reasons to sell. These range from a desire to retire, to an unwillingness to invest the additional capital the business needs, to a feeling that the company needs resources that an individual owner cannot easily provide. Since different buyers have different objectives, each will approach your situation differently. Identifying and prioritizing the issues which are most important to you enables the intermediary to only present buyers prepared to address your particular concerns.

Select a buyer who will meet your non-financial needs.

Setting the price aside, a transaction should also address an owner's non-financial requirements. For example, if you want the next generation of the family to run the business, but feel that they need time to mature as managers, then work with a buyer willing and able to develop the management team. If the business needs significant expansion capital, find a buyer who can afford to purchase the business and fund ongoing expansion. Finally, if you want to sell the business and retire in a short time frame, choose an investor willing to bring in new management upfront. If retirement is the real reason for selling, don't work with a buyer requiring you to stay around for five years. Chances are that within a few months of the closing the desire to retire will outweigh the benefits of the five-year employment contract.

Select a buyer who wants your business.

An experienced intermediary with a network of good relationships with a variety of investors will be able to screen the pool of potential buyers and only present those who really fit. While on the surface there are many buyers for any business, every buyer has specific areas of focus which, if present, will truly motivate them to close the deal. No matter how clean a business is, there are bound to be snags in the acquisition process, and a buyer who really wants to get the deal done will find a way to persevere.

Be realistic about the time involved.

A mistake that many people make is to assume that the sale of the business can be completed in an unrealistically short time frame. In reality, it takes time to find the right buyer, address the various issues that are of concern to both sides and complete the transaction. Doing it right the first time is much easier than having a quick deal or jumping into a premature match that both sides regret for years to come.

Choose an experienced intermediary.

Most people only sell a business once in their career and want to ensure that it is done correctly. An experienced intermediary plays a critical role in making sure that the process is managed properly, carefully and professionally. Good advisors will give you the confidence that your potential buyers are reputable, capable of closing, and working to complete the deal on mutually agreeable terms specified upfront.

The authors are from separate investment firms who both have acquired companies that were represented by M&A Source members. Stuart I. Mathews is Senior Vice President of Metapoint Partners, which is based in Peabody, Massachusetts. Jay Jester is a General Partner of FCP Investors, which is based in Tampa, Florida. Both firms have been active buyer participants at the M & A Source Expos.