Part 5

After selling companies for over thirty years, I have found that it is near impossible to convince a business owner to sell until the business and personal reasons align. But once they do, no good ever comes from delaying a sale. Over the past few weeks, my blog posts have focused on signs it may be time to sell your business… from boredom and a changing market place to risk intolerance. Another good reason to consider selling is a plethora of motivated buyers.

Sign #5 – It’s a Seller’s Market – Always

The three principal buyer groups are Private Equity Groups, strategic acquirers, and high net worth individuals.

Private Equity Groups have become the new conglomerates with overflowing levels of investment capital. With 2,500+ Private Equity Groups in the United States and a like number overseas, competition to buy companies remains robust among financial buyers. Multiple offers can be a reality for even some marginal or smaller companies. Premiums are being paid for companies as demand exceeds supply for those performing well in these tough economic times.

Strategic acquirers see growth through acquisitions as the preferred way to gain market share quickly, add product lines, augment human resources, enhance management, and stay competitive.

Strategic acquirers flush with cash have led the charge to buy companies particularly as banking has tightened for financial buyers.

High net worth individuals and family funds can be worthy suitors. These individuals bring significant personal finances, outside private investment capital, experience, contacts, expertise, and many times a unique investment strategy to the mix.

Perhaps you have been approached by one of these bona fide buyers who is large, cash heavy, willing to pay generously… and inebriated with the desire to own your company. (We can dream can’t we?). This may be a sign it’s time to sell.

Posted by Bob Contaldo.

Part 4

Selling your business, which is perhaps your largest asset, can be a difficult decision. It has been part of you and part of your family. It has been good to you like an old friend. You have loved it – you have cursed it – you have nurtured it, you have seen it from birth through the teen years and into maturity. Unlike us, it can live for generations – though the time will come when it must change hands.

When the cycle of business and our personal circumstances begin to herald the transition, it should be addressed in order to realize the financial security for which it was created.

In this series of blog posts I’ve been discussing the 10 signs that it might be time to sell your business.   The first sign is when the enthusiasm for the business has diminished.  A changing marketplace can also be a sign it’s time to exit, as can a risk/reward imbalance.

Sign #4 – A Change Would Be Good For the Family

Many have experienced the challenges of a family run business. As the succeeding generation grows into personal and business maturity, it may be time for a generational transfer of ownership. A recapitalization with a Private Equity Group as a financial partner can allow the founding shareholders to take the lion’s share of the business value in cash at closing, while the succeeding generation reinvests (through a small amount of the proceeds) for a meaningful share of the company going forward. The company would also have access to growth capital. How great would it be to again have a family relationship that is not encroached upon by business? Is the business stealing time from your kids? Are you trading memories for dollars? Many business owners have delayed a sale in spite of the concerns of a loving spouse who desires a different and better life for themselves.

Posted by Bob Contaldo.

Risk vs. Reward May Signal The Time To Sell A Business

Your business – it has been part of you and part of your family. It has been good to you like an old friend. You have loved it – you have cursed it – you have nurtured it, you have seen it from birth through the teen years and into maturity. Unlike us, it can live for generations – though the time will come when it must change hands and the decision to sell your business can be a difficult one to make.

In this series of blog posts I’ll be discussing the 10 signs that it might be time to sell your business.   The first sign is when the enthusiasm for the business has diminished.  A changing marketplace can also be a sign it’s time to exit.

Sign #3 – Risk Becomes a Four Letter Word

With all that needs to be done in a changing marketplace, business owners cannot afford to be squeamish when it comes to ongoing investment in the company. When one reaches the point of not making logical investments in the company or tends to count the debt rather than the probable benefit, it might be time to sell. Most business owners reach a point where they are tired of “betting the farm”, tired of personal guarantees, tired of meeting financing requirements and covenants, and worn out over protecting assets from legal liability. There comes a time when it makes sense to “take some chips off the table” and build financial firewalls.

Posted by Bob Contaldo.

Part Two

Your business – it has been part of you and part of your family. It has been good to you like an old friend. You have loved it – you have cursed it – you have nurtured it, you have seen it from birth through the teen years and into maturity. Unlike us, it can live for generations – though the time will come when it must change hands  and the decision to sell your business can be a difficult one to make.

When the cycle of business and our personal circumstances begin to herald the transition, it should be addressed in order to realize the financial security for which it was created.

In my next few blog posts I’ll be discussing the 10 signs that it might be time to sell your business.   The first sign, which I wrote about last post, is when the enthusiasm for the business has diminished.

Sign #2 – Your Marketplace Is Changing

Businesses that do not change will ultimately fade away. Change requires new market direction, more equipment, more people, new technology, expanded facilities, and other capital investment. Market changes can include more complexities involving government regulations, taxes, banking, certification requirements, customer reporting requirements, foreign competition that threatens margins and customers seeking fewer suppliers and lower costs. Many times the direction is clear, but the mind, body, and emotions are not willing to embrace change.

Download The Ten Biggest Mistakes Sellers Make.

Posted by Bob Contaldo.

Selling your business, which is perhaps your largest asset, can be a difficult decision. It has been part of you and part of your family. It has been good to you like an old friend. You have loved it – you have cursed it – you have nurtured it, you have seen it from birth through the teen years and into maturity. Unlike us, it can live for generations – though the time will come when it must change hands.

When the cycle of business and our personal circumstances begin to herald the transition, it should be addressed in order to realize the financial security for which it was created.

After 30 years of selling companies, I have found that it is near impossible to convince a business owner to sell until the business and personal reasons align. But once they do, no good ever comes from delaying a sale.

So – in the next few blog posts I will cover ten signs that it might be time to sell your business:

Sign #1 – The Thrill Is Gone

We all go through seasons in life. Young business owners focus on raising a family, planning for the future and striving for a financially secure retirement.  To that end, fighting the battles and making the sacrifices are necessary and expected as part of growing a business.  However, there comes a time when a business owner does not care to take the business any further. The battles and victories that at one time were energizing have now lost their importance, and have become somewhat boring and wearisome. The focus shifts to more time off, warmer weather, grandkids, or more leisure time activities.  Many business owners want to pursue a new direction in life that satisfies a greater personal or community need.

Posted by Bob Contaldo.

I want to sell my company, but my business is down from the economy.  What should I do? 

You want to sell right?  You have a personal compelling reason to sell, right?  Then what we have to do is find a way for you to do it.  So how do you do it?  One way is to wait.  But you say “I don’t want to wait.”  So we build in an earn out.  An earn out is a contingent payment tied to future performance.  There are  a lot of good ways to do it.  There are a lot of bad ways to do it.  We want to make sure we get one that’s easy to track, and attainable, so that if you do it right you’ll collect the same amount of money today through an earn out that you would if you held it for three, four, or five years.  So you can’t really lose so long as the business performs.  So you may ask “Do I need to stay?” And the answer is “No.”  You can do an earn out and still leave.  So it’s a great vehicle.  I would say the majority of companies we sell right now need an earn out component because everybody’s down.  If you’re down and want to sell your business, that’s the best vehicle to do it.

Watch the full interview on “Is is the Right Time To Sell My Business?”

Posted by Robert Contaldo.

Case Study

Founded in 1964, M&M Pump & Supply is a leading distributor of comprehensive systems and components used in oil and gas drilling and production to gas producers and industrial customers located primarily in the Illinois Basin. The Company also provides oil field services such as hydrostatic pipe and tank testing and cleaning, delivery, and equipment rentals. M&M Pump & Supply retained the services of Corporate Finance Associates to identify and negotiate a deal with a strategic acquirer.

M&M Pump & Supply was acquired by DN Partners, a Chicago-based private equity firm with investments in lower middle-market companies generally based in the Midwest. (www.dnpartners.com). The Company specializes in partnering with management teams to facilitate corporate spin-offs, family succession transactions, recapitalizations, buy and build strategies, and management buyouts. DN Partners’ other business interests include manufacturing, packaging, printing, and communications.