InSight

Exit and Growth Strategies for Middle Market Businesses

I Want To Sell My Business Now But I Will Not Get A Fair Price In This Market

By Gerald W. Lindsay | Sep 02, 2011

Selling Business Myths – Part 3

You may think that because the markets are depressed that there is no point in even trying to sell right now.  There is no way I will get full price for my business today, right?

Business ChartThe reality is that Private Equity Groups (PEGs) and strategic buyers are still actively looking for business investments.  These groups have an amount of capital they are committed to invest yearly on behalf of their shareholders.  They are willing to pay fair values for solid investments.

Additionally, many industry buyers are looking to gain a competitive edge through acquisitions.  An excellent way to sell your business and still get fair value is to establish an earn-out.  An earn-out is a contingent payment tied to future performance.  The payments can be tied to whatever value the parties agree is measurable and desirable, such as revenues or EBITDA. Buyers like earn-outs because they can get in with less cash on the front end.  And, they are happy to pay the earn-out because the business has performed well!  The seller’s involvement in the business may or may not be a condition.

In all scenarios, your Investment Banker is creating a competitive marketplace for multiple parties to bid on.  If multiple bidders are fighting to win the company, that is an efficient market.   You always have the right to say no.  If you get a low offer, reject it!  The ball is in the bidder’s court to make an offer that is fair to all parties.

How to Sell Your Business at Full Value in a Down Market

 

Posted by Gerald Lindsay.


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