It’s a surprise to many, but now is a great time to sell a business. Premiums are being paid.
How can this be?
First, there’s a massive supply-demand imbalance – lots of buyers and not many sellers. Private equity groups and strategic buyers are as aggressive as ever and hunting for acquisitions, but many would-be sellers are waiting due to the false belief it’s “not a good time.”
Undeterred by the weak economy, a surplus of buyers remains ready, willing and able to purchase businesses of every size, and contrary to the ever-present scuttlebutt about banks not willing to lend, they are, in fact, making loans, including loans for purchase/sale of businesses. After all, that’s what commercial banks do. They must make loans to earn a profit.
If your company’s earnings have not suffered greatly during the recession, now might be the very best of all times to execute a management buyout. Buyers are out in mass and paying premiums for companies that have performed well during the recession.
We did not see this coming but Premiums are being paid for companies that are selling today. Companies that would have topped out at five or six times EBITDA three years ago are going for seven, even eight today.
The biggest barriers to business sale bliss are low or declining profit and revenue source concentration. After all, it’s steady and dependable profit that drives value. Add consistent growth and buyers will line up at your door. But many a slam-dunk deal is derailed by latent defects uncovered during due diligence.
Business owners find their motivation in varied things. Commercialize a pioneering methodology. Be one’s own boss. Prove naysayers wrong. Provide a great place for people to work.
While every entrepreneur has his or her unique set of goals, virtually all share one in common — to one day sell for a boatload.
How much? Well, more is better. And so the question every business owner asks is: “What can I do today to maximize the eventual sale price of my business?”
We’ve been reporting that premiums are now being paid for businesses that have managed to post decent earnings during the recession. One key reason is there are many more buyers than sellers right now. Lots of buyers fighting to win the few deals available means higher prices.
It’s a sellers market.
Cash is king, but owning a business can have some pretty nice perquisites. So what does a business owner do when he or she really wants to take serious chips off the table but does not want to give up ownership or management?
Need to buy out a shareholder but don’t want to put up your own money?
Need to take some chips off the table but don’t want to sell out?
Reduce your risk and gain some experienced, well-capitalized and well-connected partners?
Consider leveraged recapitalization.
For owners of large and midsize companies, need for liquidity does not have to be an all-or-nothing decision. It really isn’t like the famous song by The Clash:
“Should I stay or should I go now? If I go it could be trouble. If I stay it could be double.”
When business owner(s) need or want to take big money home, they have options.
Selling a business is a sales process. The business sale price ultimately received for a business is greatly impacted by HOW the business is sold. Maximum business sale price is garnered through appropriate preparation of the offering documents (packaging); savvy execution of the proven “quiet auction” process; and deft negotiation and orchestration of the process by an experienced and talented dealmaker.
© 2012 DL Perkins LLC. All rights reserved | Acquisition Advisors is a trademark of DL Perkins, LLC. Registered in the U.S. Patent Office. | Call (877) 525-4321
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