InSight

Exit and Growth Strategies for Middle Market Businesses

Meet the Buyers

By Marc Borrelli | Feb 17, 2012

The first time that many sellers meet the potential buyer of their company is during due diligence when the buyers attend a presentation by the company on its strategy, plans and performance. At these events, the potential buyers are seeking to learn about the company and gain insight into the “human” side of the business, in addition to the Information Memorandum that they have been supplied.

Business MeetingA key factor in determining the demand for a company, and thus the price realized, is the involvement of the management team in the day-to-day operations of the company and the execution of the business plan.  If the management team does not fill these requirements, then the owner is basically doing everything and the management team is  management in name only…in reality they are just employees who perform but don’t lead or manage. As I tell potential clients, “You can sell a company, but you cannot sell a job!”  So,  if the management team doesn’t manage, then in reality there is no company and the owner just has a job.

In addition, most owners are looking to exit the business within a reasonable time of selling. In order for any buyer to allow the owner to exit, the owner needs to have a management team that can run the business in his absence and thus be a redundant cog in the company.

Given that perception is reality, when meeting the management team the key requirement is for the management team and owner to create the impression that the owner is redundant and that the management team can operate the business effectively without him. To that extent, it has always been our advice to clients that the owner’s sole role at the management presentation should be limited to welcoming the potential buyers, informing them of the agenda and procedure for the meeting. After that, the owner should sit down and allow his management team to present and answer all questions. The better the management can handle this process, the greater the confidence the buyer will have in them and their ability to run the company in the absence of the owner.

 

7 Step Guide to Business Exit Planning

 

Posted by Marc Borrelli.


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