Last week, we discussed first steps you might take toward selling your closely-held business (read it here). This week, we discuss identifying potential buyers.

First, are you open-minded about what type of buyer you want, or do you have a clear idea already? Typically, buyers can be found:

• Among your family, if yours is a family-owned business. Does any of your heirs possess both your commitment to the business and the savvy and experience to run it? If so, and you don’t need additional funds to finance your retirement, family succession may be a good way to go.
• Within your business – if you have partners, are they willing to buy you out? Alternatively, if you are the sole owner, do you have a management team capable of assimilating your role and ready to jump at the chance? If either of these scenarios is true in your case, consider this a serious potential sale.
• Outside your business. These buyers often provide the best price option, but will likely represent a true changing of the guard via the sale. You may, with buyers such as these, want to clarify what a sale to an outsider will mean for your employees, as well as for your business.

We recommend strongly consulting with your trusted business advisors, such as your attorneys and your financial advisor (experienced in selling closely held businesses and the Transaction Advisory process), to determine which type of buyer would be best for you, your business, and your family.

If you decide on an outside buyer, there are two principal types to consider:

• Strategic – these buyers already work in the same industry you do, and are looking to expand their footprints whether locally, regionally, or nationally.
• Financial – these buyers often look for a profitable investment, potentially with an eye to a future sale of the business. Some such buyers will want a fairly quick turn-around from the purchase of your business to their own sale of the business, while others, such as another closely-held business or family office, may think they’ll sell eventually, but can hold onto the business for an extended time.

You and your transaction team – as discussed in our last installment, this will likely include your financial advisor, your attorney, your banker, and potentially a broker – should discuss the sort of buyer you want (strategic, financial, or no preference). Note that a broker will take a percentage of the sales price – up to 10% – as fee, which will either mean the buyer pays a higher price, or you eat the fee.

There are a number of ways to find potential buyers:

• Industry conferences, events, and contacts
• Business / trade papers and newsletters
• Recommendations – from peers, colleagues, and/or advisors
• Websites – there are sites dedicated to businesses for sale

Pre-qualify any and all potential buyers financially, and, with your team, prepare a non-disclosure agreement, as any serious potential buyer will need to see information about your business which should not be made available to the general public.

Selling a closely-held business can take six months to a year, so if you are seriously considering the sale of your business in 2022, now is the time to contact us and get started.

If you would like to get the process underway, please click here to email me directly.

Until next time –

Peace,

Eric