Buying and selling a business is a significant transaction for both the buyer and seller. For many, it’s a once in a lifetime event. The process can be exciting and financially rewarding, or frustrating and an economic failure. Success or failure largely depends on how well prepared, informed, and committed the parties are about the process.
Issues that surround the transfer of business ownership include valuing the business, preparing a business for sale, strategies to maximize business value, timing the acquisition or sale, targeting the right type of buyers, buyer due diligence, financing and tax structuring strategies, negotiating the transaction, post transaction integration, and so on.
By understanding these issues and anticipating the complexities that may be encountered, buyers and sellers will have more realistic objectives, ultimately leading to a more successful transaction.
Business owners decide to sell their business for many reasons ranging from impending retirement, health issues, lack of a clear successor, or simply a desire to pursue other interests. The Small Business Administration estimates that at any given time, 40% of U.S. businesses face the issue of how to transfer ownership.
The periodical M&A Today has reported that “65% of business owners do not know what their company is worth; 85% have no exit strategy.” Even more worrisome, it’s estimated that business owners have approximately “75% of their net worth tied up in their business.”
Unfortunately, a desire to sell does not always lead to an actual sale. Many times it’s because of one of the following reasons:
- The business was not adequately prepared for a sale
- The buyer and seller could not agree on price and terms
- The seller did not realize that the selling process is time consuming and complex, and did not allow sufficient time for a successful outcome
- The buyer often lacked (or failed to commit) the necessary time and financial resources to make the acquisition
If you know of someone who’s thinking of selling or buying a business and who might benefit from a complimentary, confidential, consultation, have them contact me directly at 813.299.7862, or firstname.lastname@example.org
By: Mike Ertel, Transworld M&A Advisors