21 Oct Business Sellers Maximize Value When Key Managers Are Involved
Most business owners fail to understand that there is a way they can sell their businesses, when they decide the time is right for them, for the very highest price possible, and serve well the many people that have served them so well for so many years (i.e., the loyal and talented managers, employees, customers, etc.).
Business owner-sellers who lack this knowledge and understanding will attempt to sell the business without the full cooperation of the key manager(s). The result is a less than optimal transaction for all.
Sell to the wrong company, or with the wrong type of transaction, and the business is put at substantial risk. In short, the “good thing we had going” can be ruined unnecessarily and, dare we say, tragically. Worse still,the seller doesn’t get his or her desired transaction closed (because it’s hard to do so without the knowledge and assistance of the key manager and/or managers), the relationship between the owner-seller and the key manager(s) erodes, talent departs the business due to extreme lack of certainty about the their future, business performance declines and business value erodes. Don’t think for a second this does not occur. We see it all the time. It happens every day.
Business sale price can best be maximized when the management team is fully involved, has a financial incentive to make sure it goes well for the owner-seller, and the experienced managers are committed to remaining with the business. This is called continuity. Every business buyer wants it, and the best buyers don’t want to manage the company themselves, they just want to own it (all or part of it). They’ll pay top dollar when the key managers are involved in the sale process and are committed to staying with the business. They will provide equity going forward to the manager(s) who commit to stay. If the experienced managers DO have equity capital they can contribute, the additional equity providers will gladly allow the managers to own as much as their money will allow – even if it means the equity providers have a minority interest going forward.
So, done right, what was a very confusing, stressful and suboptimal process can become an exciting win-win-win endeavor for all. The important long-term relationships are not harmed but rather are strengthened.
This is called opportunity.
Thousands of sources of equity capital in the U.S. and around the world are willing and able to pay top dollar for great companies, leave the tenured management in place, provide meaningful ownership to the manager or management team that remains, and mentor and support the new owner-managers in continuing to grow the business. This is the type of transaction Acquisition Advisors specializes in and is proud to bring about.
Ideal candidates for this type of transaction have the following characteristics:
- The businesses is in the United States.
- The business is well-established, healthy and earning annual EBITDA of $2 million to $25 million.
- The current owner wishes to sell but does not need to sell.
- The current owner wants top dollar, but such is not his/her only goal in the sale. Particularly, the seller also wants to:
- “Take care” of his/her employees (and secure higher ownership for the key manager(s) to the extent possible.
- Do his/her best to place the business in a position where it has a good chance of continuing to succeed.
- See the business continue to be in the facility and/or community it currently is in.
If you the talented and tenured manager and/or minority owner of a company that meets the above criteria, show this to your controlling owner(s).
If you are the controlling owner of a business that meets the above criteria and your motives fit with what we’ve described, we hope you will give this serious thought. There’s a lot at stake.
If you’d like to confidentially discuss these issues, your business or situation, our process methodology or experience, contact us at any time. Completing win-win-win transactions of this type is our business and our passion. For all the right reasons.