Is This the Time to Sell a Business? - Intermediary 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 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 you 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.