This the Time to Sell a Business?
is Key to Preparing Business for Sale
Buying or selling a business in today’s
environment is like rolling dice on a moving table - it’s
an uneven proposition at best. Both buyers and sellers are
uncertain about the values of small and closely-held businesses
and wonder whether they are likely to get value for their
dollar. There is broad feeling afoot that the volatility in
U. S. equity and capital markets during the past several years
has caused major shifts in shareholder value for both public
and privately held companies. It’s simple enough for
shareholders of publicly traded shares to test this by reading
the Wall Street Journal.
It Depends! The answer to the question “Is
this a good time to buy or sell a business?” is, “It
depends.” Both buyers and sellers should be aware of
the prevailing financial climate. Interest rates, driven downward
by falling market prices and economic uncertainty meant that
buyers have to put more equity into acquisitions, making it
harder for sellers to find buyers with adequate capital to
purchase their businesses.
Consolidation Alters Market. Another factor
that plays a role in timing your sale is consolidation. Smaller
businesses are often targets for larger competitors who want
to expand or diversify their markets and achieve economies
of scale in their overhead. In a climate where there have
been many entrants and demand for products or services is
falling or remaining constant, many companies cannot continue
to expand in their own market areas and must either buy or
die. Industry conditions and the effects of global marketing
can also affect timing for sales or acquisition.
Sellers should examine their motives for selling.
The seller must also carefully consider his motivation for
selling. Many business-owners are selling to cash-out after
a purchasers, and will spend as much time as needed to understand
your business or the long career in their businesses. Preparing
a business for sale, and positioning it so that it’s
presented to prospective purchaser at peak-value can take
time. Locating investors and bringing good values to long-cycle
markets can consume many months. In some cases sellers have
not allowed themselves enough time to market their businesses
adequately. The time to start is now!
Intermediaries Know How to Present Your Business for
Sale. No matter what the economic climate though,
one thing is certain: the buyer and seller will both need
professional assistance to make sure their decision-making
is sound. Accounting advice may be necessary to ensure that
the financial statements are accurate and fairly depict the
condition and performance of the firm, and to identify important
tax issues that can make-or-break a deal. Legal counsel will
certainly be required to ensure that no laws are violated
and that any agreements between the parties protect the rights
of all involved.
Business Intermediary is Key. But just as
important, it will be necessary to retain a top-notch business
intermediary. This is the guy we used to call a broker. These
days selling a business is a lot more involved than just putting
a classified ad in the newspaper.
The intermediary will be your counselor and marketer if your
are the seller. If you are the buyer he will be your own personal
corporate acquisition department. Because he is experienced
and knowledgeable he will know just how to highlight the best
features of your business for a prospective purchaser, and
how to negotiate the best deal with a seller.
All good intermediaries are experts at preparing the “book”
or offering memorandum that describes your business to prospective
business you are seeking to purchase.