Selling your business is one of the most important decisions in your entrepreneurial life. Therefore, it is important to find the right buyer: someone who can continue your business, grow it, and respect what you have built.
How do you make that choice? This article tells you what to look for.
One of the common misconceptions prior to a sales process is that the "best buyer" is automatically the one with the highest offer. In practice, we at Crowe Foederer see that choosing the right buyer is a much broader issue, bringing together financial, strategic and personal factors.
Type of buyer makes the difference
Not every buyer is the same. Strategic buyers (such as competitors and chain parties) are often willing to pay a higher multiple/price because of synergy benefits, while private equity parties, for example, focus more on growth, optimization and future exit.
Management buy-ins or buy-outs also involve very different dynamics. As an entrepreneur, it is therefore crucial to determine what type of buyer suits your objectives: do you want to exit completely or stay on partially, or above all, be sure that your life's work will be continued properly?
Continuity and culture
For many sellers, emotions play a bigger role than previously thought. A company has usually been in the hands of the (family of the) DGA for a long time, whereby both the staff and the company have been handled with care. For the seller, it is therefore an essential question what will happen to the people and the company culture after the takeover.
Here, a buyer with a clear vision of continuity and respect for the company culture can be more satisfying in the long run than a party that is purely financially driven.
Structure and conditions
The ultimate revenue from the sale is often determined not only by the purchase price, but also by the deal structure. Consider, for example, earn-outs and vendor loans. Some buyers offer a higher price but require vendor loans with longer repayment terms or higher earn-outs, which increases the seller's risk.
A buyer who structures a deal without an earn-out, for example, may be more attractive on balance.
The role of the adviser.
Based on our experience, we know that finding the right buyer is always customized. It requires careful consideration of price, strategy, certainty and emotion. Therefore, the message is: look beyond the number at the bottom of the line.
A well-considered choice of the right buyer not only determines the success of the transaction, but also how you can look back with satisfaction on an important chapter in your entrepreneurship. It is therefore essential for entrepreneurs to enlist the help of acquisition advisors in finding the right buyer.
