As the new year begins, I want to comment on the M&A year behind us and the one ahead. As expected, the market was strong in 2015. Deal volume hit a new global record by early December, reaching $4.304 trillion, ahead of the previous record set in 2007.
We’re in the process of an office remodel at Cornerstone. As part of that project, we’re pulling down all the pictures of businesses we’ve sold and helping our clients envision the future instead. To do that, we’re asking past clients to tell us what they’ve done with their time and money after their sale.
As you’re thinking about selling your business, it’s time to plan your own bucket list. Because if you don’t spend time looking ahead, you’ll let fear of the unknown get in the way of a sale.
Over 17 years of selling businesses, I’ve talked with many individuals who dream of being their own boss. Some of them have fuzzy plans and little initiative. With others, you can tell it’s only a matter of “when,” not “if.”
But even many committed future business owners are still not sure if buying makes the most sense rather than starting a business on their own. Of course, I’m biased and I think they should buy. But there are times when a startup is the better choice. Here are some pros and cons of both:
Scott Bushkie, For Post-Crescent Media 10:25 a.m. CST December 5, 2015
When buying a company, one key factor in your success is the transition that happens immediately afterwards. You need time with the previous owner to understand how and why they operated the business the way they did. And you need their support to transition customer relationships.
As you think about negotiating for the seller’s time after a sale, think about their role in the business. Do they have a strong, empowered management team? Or did the seller operate the business from a place of tight, centralized control?
Many of my clients have told me that selling a business is like giving a child up for adoption or sending their teenager to an out-of-state college. They know it’s the right thing to do, but they miss the daily involvement, the challenge, and the companionship.
It’s the same thing with a business. At some point, it makes sense for you and the business to part ways. Maybe the company has outgrown you and needs new leadership to thrive. Or maybe your passion has started to wane, and you’re feeling like work has become a grind.
Either way, you have two options.
Instead of focusing on price, some sellers are more interested in making sure the company stays where it is, that the employees continue to have jobs, and that the management team gets an opportunity to buy an ownership stake.
Given these priorities, we look at the different ways this company could go to the market.
I’m representing a company out west doing $20 million in sales with $4 million in EBITDA at Cornerstone Business Services. That’s in the mid-tier size for regional businesses, but it’s not enough to get the national players excited about an acquisition. The big firms want opportunities closer to $10 million EBITDA.
But as I contact various strategic buyers in the region, I find a few Boomer business owners who are also looking to sell. So after a few of those calls, I have a different story to tell.
Now we’re partnering with a private equity group that may come in and buy not just my client, but one or two others of similar size. The acquisition makes sense for them because they know they can combine two or three of these businesses and reach that $10 million EBITDA target.
Buying a business can be much safer and more predictable than starting one from scratch; however, it can be a very confusing and complicated process. This webinar will not only highlight some of the common mistakes buyers make that can set you up for disaster right from the start, but it will also share some of the key characteristics you should look for in a business to give you the best chance of not just surviving but thriving in order to create the lifestyle you really want for you and your family.
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