MISTAKE #1: Selecting the Wrong Buyers
Forget the obvious. Sophisticated buyers who have strategic acquisition goals, and are willing to pay above market multiples, are some of the best yet unexpected buyers. Public, private, or international buyers, and private equity groups, often pay premium prices to acquire seemingly ordinary businesses that offer a synergistic advantage to
their current operations.
Too many business owners waste valuable time and effort on potential buyers who, typically, will pay the least. Private individuals, vendors,… Continue reading
Private equity just wants to be appreciated. A first step would be to admit that it isn’t always acting in its portfolio companies’ best interests.
During a recent Columbia Business School conference, several private equity execs talked about what a lousy job their industry does on public relations. Specifically, they bemoaned how John Q. Public still sees them as strippers and flippers, rather than value-added investors who often leave companies better than they found them.
It certainly is true that… Continue reading
There are several options when making and evaluating a resource to sell your company. So, how do you know if you have not made a questionable decision? The type of advisor and expertise required depends on the size of your company. Each is uniquely qualified to serve clients based on size.
M&A intermediaries typically have many years of experience in evaluating buyer intent. Thus, they are able to quickly ascertain whether business buyers are serious or not. In contrast, a seller who is not using a M&A intermediary, sometimes referred to as a broker by the layman, may invest considerable time in courting each buyer who turns out not to be serious or qualified.
Once potential buyers have been found, the M&A intermediary also have the ability to convert interest in… Continue reading
- Restrictive Fee Agreement: Sellers should be willing to pay a generous retainer and accomplishment fee to not only peak the interest but to obligate the intermediary to perform. While monthly retainers of $5 to $10 thousand are the accepted norm, more than $20-$25 thousand upfront could result in some complacency by the intermediary. In lieu of the generous fees, the seller should negotiate a relatively easy exit strategy to terminate the agreement with the intermediary if the assignment is not… Continue reading
Today we continue the conversation we started on Tuesday, asking investment bankers and private equity groups to speculate about the coming year.
Part One of the series was an interview with Darren Snyder and Tony Danielak from Prairie Capital, a middle market private equity group in Chicago. In the second installment in this series, we sat down with Peter Sokoloff, Senior Managing Director at Peter Sokoloff & Co, a middle market investment bank in San Francisco focused on Telecom and… Continue reading
In the M&A world, it is often said that strategic buyers pay higher valuations than financial buyers do. Are they simply irrational buyers? Not necessarily. In many cases, strategic buyers are motivated by different facets of the acquisition and may have different avenues by which they can generate an acceptable ROI from the target. In client interviews with bankers and strategic buyers who are part of the AxialMarket network, we isolated four concrete and logical reasons behind strategic buyers’ ability… Continue reading
No experienced buyer purchases a company without first learning everything there is to know about it. That learning process is known as “due diligence”.
During due diligence, a buyer, its accountant(s), lawyer(s) and any other professional advisor it employs will examine every aspect of every one of the seller’s contracts, procedures, relationships, plans, agreements, systems, leases, manuals and financial documents.
This process requires an extraordinary amount of time and attention on both the buyer’s and the seller’s parts. That’s why… Continue reading
Most middle market company CEOs are aware of the process of selling a company, but some CEOs are woefully naïve in dealing with the sale of their company. For example, my experience is that the decision to sell is mostly event driven. An event such as sudden burn-out, partner dispute, family death, severe competitive pressures, lack of capital, etc. Seldom do CEO owners plan three to five years in advance when they reach a personal milestone such as 65… Continue reading
So what if you’ve never sold a business before? Who better to lead the sale process than the person who
knows far more about the business than anyone else? Who better to steer the ship than the person who knows exactly what they want from the sale of a business?
Before you answer, pause for a moment to consider the possibility that you might just be the worst possible person to sell your company.
Why? As the one most emotionally… Continue reading