Think ‘want,’ not ‘whatever’ in business sale

By Scott Bushkie – CBI, M&A Advisor

Scott Bushkie - Cornerstone Business Services

One of the key questions we need to ask when planning a business sale is, “How involved are you willing to be (or would you like to be) after a sale?” For some sellers, their knee-jerk response is “Whatever it takes to get it sold!”

Unfortunately, that answer can cause some real heartburn down the road. As a seller, you need to understand what you want out of a sale and how long you’re willing to stick around. Because selling a business isn’t like selling a house – you don’t get to hand over the keys and walk away on closing day.

Imagine your ideal transition. Are you really willing to support the new owners for years after a sale? Or are you really ready to walk away and do something completely different with your days? Your answer impacts the kind of buyer we target. And, it’s actually one of the first questions buyers have for us when they call.

They want to know what kind of sale you want, and what your short- and long-term intentions are. Different buyers have different management strategies, and the goal is find a buyer whose ideal scenario is a good match with your own.

Private equity groups, for example, are often looking for sellers who want a leveraged recap and want to stay on in an active role. These buyers are not so much acquiring a business outright as they are buying a majority stake in a partnership with plans to grow.

Strategic buyers, that is existing businesses, on the other hand, are better prepared to replace you with their own leadership. These are the buyers to target when you are burned out and impatient for retirement.

With the right strategic buyer, you could be completely out of the business in as little as 30 to 60 days after a sale. In most cases neither a private equity firm nor an individual buyer is likely to let you walk away so soon.

Problems occur when you approach a sale with that “whatever it takes” attitude and then realize, months into negotiations, that you couldn’t possibly continue coming into work for the next three years. Or you told the buyer you want to leave as soon as possible only to really feel like you don’t want to go “cold turkey” after all these years and would like to work in your current role or a reduced role for some period of time.

It’s always a good idea to be flexible. But while you don’t have to commit to any one strategy, you should identify your ideal state. In today’s marketplace, with as many buyers as there are, chances are good we can find a buyer with similar goals. But first, you have to be honest with us, and yourself, about what it is you truly want.

Share on Facebook0Share on Google+0Tweet about this on TwitterShare on LinkedIn10Email this to someone
mm

A thought-leader in the industry, Scott developed the Cornerstone Process to offer investment banking M&A-level services to the lower middle market. The result is a closing ratio that’s more than double the national average.