Should you sell your company now? Not only does the answer depend on you (how much fire you’ve got left in your belly) and on your exit goals (can a sale achieve your retirement needs?), it also depends on what you’ve got to sell, what industry you are in and M&A market conditions in your market segment. Let’s look at each.
What are you Selling?
There are several characteristics (that we call “Value Drivers”) that buyers look for when deciding whether to buy (or pay a premium) for a company. These include:
- Stable, motivated management and a high-performing
- Systems that sustain the growth of the business
- Realistic growth strategies
- Effective and documented financial controls
- Appearance of facility consistent with asking price
- Growing cash flow, profitability, revenue and sales
- Protected proprietary technology
- Attractive business sector
Buyers look not only to your company’s Value Drivers, but also to whether your business is in an attractive
business sector. In today’s economic climate, business sector alone may determine if your company is
saleable. According to investment banker Kevin M. Short of Clayton Capital Partners, today’s buyer is
looking for companies in the following “niche” industries:
Non-niche industries would include: retail, financial, home-building or those related to consumer
discretionary products or services.
The M&A market for multi-billion dollar companies is tenuous, but the market for well-prepared, wellpositioned
(in a favorable business sector), and well-performing companies in the $5 million to $150 million
range is healthy. Valuation multiples are likely lower than those during the boom part of the cycle, but solid
companies can still receive a solid valuation — and there is financing available for these transactions in this
If you and your company are ready to sell, let’s look beyond the hysteria to the facts: Private Equity Groups
(PEGs) have hundreds of billions of dollars available to acquire operating companies. These PEGs are
looking for profitable companies in the $5 million to $150 million range. It is most important to collect and
evaluate your industry’s market data before eliminating this option.
If your company is worth less than $5 million, what are your options? First, assuming that the current storm
is more than you can stomach, you have a solid company and an earlier-than-planned departure does not
affect your retirement goals, you can pursue a sale. With local bank financing still available for good
acquisitions, your company may very well be someone else’s target acquisition. Your job (and that of your
advisors) is to make your company as attractive as possible by paying close attention to the Value Drivers
described above, and creating and implementing a short-term action plan to increase each driver
In addition, if conventional financing is not available to a buyer, financing is available under the Small
Business Administration’s 7(a) loan guaranty program. This loan guaranty program can be used to acquire
businesses, with loans of up to $2 million. The Obama team has promised to increase the loan limit and
temporarily suspend all SBA loan fees
The bottom line is that financing, especially for “smaller” companies may be more available than you think. If
that is indeed the case, does it affect your decision to sell or stay?
If you decide to sell…
No matter the size of your company, if you decide to sell, you must do so in a way that leaves no money on
the table. This means that you must make it as attractive as possible to buyers (see Value Drivers above)
and that you must retain a transaction advisory team skilled in sales of companies like yours. We can help
you find these skilled advisors.
- Consumer Staples
The information contained in this article is general in nature and is not legal, tax or financial advice. For information
regarding your particular situation, contact an attorney or a tax or financial advisor. The information in this newsletter is
provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients
should consult their legal, accounting, tax or financial advisor. This article is not intended to give advice or to represent our
firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires
the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a
particular matter, we will always work closely with you to help you gain access to the resources and professional advice that
In addition to our business growth and value maximization practice, we at Business Design, LLC direct your attention to our Transportation / Logistics Management programs and our International and Domestic Receivables financing products. These products should be of significate interest to Business owners, Private Equity partners and C Suite officers. Our Web site and welcome your inquiries.
Cliff Duffield: 913 302 6937